The One Big Beautiful Bill, now a law, “permanently” increased the maximum lifetime exclusion amount that any US citizen or resident can use to shelter gifted assets or assets passing at death from the federal gift or estate tax. The new estate and gift tax exclusion beginning in 2026 is $15 million per US citizen and resident. The exclusion was originally slated to be reduced to $5 million plus inflation in 2026.
“Permanent” is only permanent as long as the current administration is in control. However, the estate transfer tax system is a very unpopular tax. Consider three reasons why the federal estate tax exemption most likely will not be reduced:
1) In the past 100 years, the exclusion has only increased. In the 1980’s, the estate tax was $600,000.
2) Congress, who is in charge of increasing or decreasing the exclusion, for the most part, is made up of wealthy individuals. Would they pass a law that negatively impacts themselves?
3) The estate transfer tax feels very distasteful to so many US citizens and residents. When Frank Luntz, a wordsmith, helped then-President Bush paint a negative perspective about the estate tax, he renamed the estate transfer tax “The Death Tax.” Immediately, US citizens and residents felt it was an unfair tax. As the saying goes, “How can we ask families to visit the taxman and the grave-digger on the same day?”
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