Key Takeaways
- 2026 federal estate tax exemption: $15 million per person ($30 million for married couples), indexed for inflation
- Tax rate on estates exceeding exemption: 40% federal rate plus potential state estate taxes
- Strategic opportunity: Higher exemptions create planning windows for transferring appreciating assets before political changes
- Bottom Line: Families who implement estate tax planning strategies now protect wealth that would otherwise face 40%+ taxation while locking in growth outside their taxable estates.
For families whose estates fall below $15 million (or $30 million for couples), estate tax planning priorities shift from reducing estate taxes to improving income tax efficiency. This changes the calculus on which assets to gift and which to retain.
Highly appreciated assets held until death receive a step-up in basis, eliminating built-in capital gains. If you’re no longer facing estate tax exposure, holding onto appreciated securities or real estate until death might make more sense than gifting them during life. Your heirs inherit at the current fair market value, avoiding capital gains tax on decades of appreciation.
Trust structures should provide flexibility around income tax brackets and distribution timing. Some families build provisions that allow trustees to make distribution decisions based on beneficiaries’ tax situations each year, rather than locking in fixed distribution schedules that might create unnecessary income tax burdens.
The One Big Beautiful Bill Act (OBBBA) permanently increased the federal estate tax exemption to $15 million per individual starting January 1, 2026. While “permanent” in legislative terms, high net worth individuals understand that future administrations can change tax law. Estate tax planning isn’t about tax avoidance—it’s about preserving the wealth you’ve built for the people and causes you care about, rather than handing unnecessary portions to the IRS.
Understanding Current Estate Tax Exposure
Estate tax planning starts with calculating your actual exposure. The federal estate tax applies to your gross estate—everything you own or control at death plus prior taxable gifts. This includes real estate, investment portfolios, business interests, retirement accounts, life insurance proceeds, and even certain trust assets if you retained too much control.
State estate taxes add another layer of complexity. New Jersey eliminated its estate tax in 2018, however New Jersey has an Inheritance Tax which is a tax on the transfer of assets from a deceased person to certain beneficiaries. New York maintains a $7.16 million exemption for 2025 with rates up to 16%. Connecticut, Massachusetts, and Oregon impose their own estate taxes with thresholds well below federal limits. If you own property in multiple states or have moved after accumulating wealth, your estate faces potential state-level taxation that federal planning doesn’t address.
Strategic Wealth Transfer Under OBBBA
The $15 million exemption under OBBBA provides expanded opportunities to transfer wealth, but political uncertainty means these provisions could change under future administrations. This creates urgency for high net worth families to act while favorable exemptions remain in place.
Annual exclusion gifts allow you to transfer $19,000 per recipient in 2025 and 2026 without touching your lifetime exemption. Married couples can jointly gift $38,000 per recipient annually. Over a decade, a couple with three children and six grandchildren can transfer $3.42 million completely tax-free through annual exclusion gifts alone.
Lifetime gifts using your current exemption lock in today’s values while removing future appreciation from your estate. A $5 million business interest gifted today might be worth $15 million when you die—but only the $5 million counts against your exemption. For families with appreciating assets like growing businesses, real estate portfolios, or concentrated stock positions, transferring these assets now captures future growth outside your taxable estate.
Trust Structures That Minimize Estate Taxes
Irrevocable life insurance trusts (ILITs) remove life insurance death benefits from your taxable estate. Life insurance policies you own personally create estate tax problems—a $10 million policy adds $10 million to your gross estate. Properly structured ILITs own the policy instead, keeping proceeds outside your estate while providing liquidity to pay estate taxes or equalize inheritances.
Intentionally defective grantor trusts (IDGTs) freeze asset values in your estate while you continue paying income taxes on trust earnings. This income tax payment represents additional tax-free gifting to beneficiaries—you’re transferring wealth by paying taxes the trust would otherwise owe. IDGTs work particularly well for business owners or families with appreciating investment portfolios.
Spousal lifetime access trusts (SLATs) combine the benefits of IDGTs with indirect access through your spouse. You move assets out of your estate while your spouse can receive distributions if needed. These trusts require careful drafting, especially when both spouses create them, but they provide flexibility that pure irrevocable trusts lack.
Grantor retained annuity trusts (GRATs) transfer appreciating assets to beneficiaries while you retain income streams for a fixed term. If you survive the trust term, asset appreciation passes to beneficiaries tax-free. GRATs work particularly well for business owners expecting significant value growth or for transferring investment portfolios during market recoveries.
Dynasty trusts benefit multiple generations while staying outside the estate tax system for decades. With the Generation-Skipping Transfer Tax (GSTT) exemption also increased to $15 million under OBBBA, you can fund trusts that provide for children, grandchildren, and even great-grandchildren while avoiding estate taxes at each generational transfer.
Business Succession and Estate Tax Integration
Family business owners face unique estate tax planning challenges. Your business interest might represent 70-80% of your net worth, creating both liquidity and valuation issues. Estate taxes come due nine months after death—but selling a closely held business to raise cash isn’t always feasible.
Valuation discounts for minority interests and lack of marketability reduce the taxable value of business interests transferred to family members. A 35% combined discount isn’t unusual for gifts of non-controlling interests in family businesses. Strategic gifting of minority interests over time leverages these discounts while gradually transferring ownership to the next generation.
Buy-sell agreements funded with life insurance provide liquidity and establish value for estate tax purposes. These agreements prevent forced sales to outsiders, ensure fair pricing for exiting family members, and provide cash to pay estate taxes without liquidating the business.
Family Office Coordination and Wealth Management
Estate tax planning integrates with every other aspect of high net worth financial management. Your investment strategy affects estate values and liquidity. Your charitable giving creates deductions that offset other income and reduce your taxable estate. Your business structure determines how easily you can transfer ownership interests.
Wiss Wealth & Retirement services provide coordinated estate tax planning that connects with your complete financial picture. We work alongside your estate planning attorneys to implement trust structures, coordinate gifting strategies, and ensure your wealth management supports your legacy planning goals.
Our team handles the financial administration required by estate planning—trust accounting, gift tax return preparation, estate tax projections, and ongoing compliance. We track basis in transferred assets, document gift strategies for future estate tax returns, and maintain the records that substantiate your planning.
For families with significant real estate holdings, we integrate property management considerations with estate planning. Tax loss harvesting in investment portfolios can offset gains from property sales. Cost segregation studies affect both income taxes and estate values. Our comprehensive approach ensures no planning opportunity goes unnoticed.
Taking Action While Favorable Provisions Remain
Estate tax planning works best when implemented years before death. Trust structures need time to mature. Gifting strategies require multiple years to maximize benefits. Life insurance underwriting takes months. Waiting until health issues arise eliminates your most valuable planning options.
OBBBA created what legislators call “permanent” exemption increases, but political realities mean future administrations could modify these provisions. High net worth individuals should conduct estate tax projections now, model scenarios under different exemption levels, and implement appropriate wealth transfer strategies while current opportunities remain available.
Wiss Wealth Management Services help high net worth families protect the wealth they’ve built through strategic estate tax planning that integrates with comprehensive wealth management. Our experienced advisors work with your existing estate planning attorneys and financial professionals to implement tax-efficient strategies that preserve your legacy.
Ready to protect your family’s wealth through strategic estate tax planning? Contact Wiss for a confidential consultation on estate planning strategies that leverage current exemptions while building flexibility for future law changes.
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