The 2026 Estate Tax Sunset: Why You Must Use Your $15M Exemption Now

As the sun begins to set on 2025, the American financial landscape is approaching one of the most significant shifts in decades. High-net-worth individuals and business owners are staring down a calendar that marks the end of an era for aggressive wealth transfer. The Tax Cuts and Jobs Act (TCJA) of 2017, which effectively doubled the federal estate and gift tax exemption, is scheduled to sunset on December 31, 2025.

For those with substantial estates, the window to leverage the historically high exemption is closing rapidly. Current tax planning and tax strategy discussions are dominated by the need to lock in these higher limits before they revert to pre-2018 levels. Failing to act before the 2026 deadline could result in a tax liability that consumes nearly half of your family’s legacy.

The Impending Estate Tax Cliff

The 2025 federal estate tax exemption sits at an unprecedented $13.99 million per individual, or roughly $28 million for a married couple. This figure represents the total amount of assets you can transfer during your lifetime or at death without incurring a 40% federal estate tax. However, on January 1, 2026, this threshold is projected to drop significantly.

According to IRS guidelines on estate taxes, the basic exclusion amount will revert to its 2017 level, adjusted for inflation. Financial analysts anticipate the new exemption will hover around $7 million per person, a reduction that effectively slices your tax-free transfer capacity in half. For an individual with a $15 million estate, this cliff represents a multi-million dollar increase in potential tax exposure.

Why Locking In Matters Today

The primary goal of proactive tax planning in 2025 is to utilize the bonus exemption while it still exists. The federal government operates on a “use it or lose it” principle regarding this temporary increase. If you do not make taxable gifts that exceed the projected 2026 exemption amount before the end of this year, that extra capacity simply vanishes.

To achieve meaningful tax savings, a donor must give away more than the amount that will be available after the sunset. For example, if you gift $10 million today and the exemption drops to $7 million in 2026, you have successfully shielded $3 million from future taxation. If you gift only $5 million, you have not utilized any of the bonus exemption, as that $5 million would have been covered by the lower 2026 limit anyway.

The IRS Anti-Clawback Assurance

A common concern among successful individuals is whether the IRS will claw back the taxes if the donor dies after the exemption has decreased. Fortunately, the Treasury Department and the IRS issued final regulations (TD 9884) to address this exact anxiety. These regulations ensure that individuals who take advantage of the increased gift tax exclusion will not be penalized if the exemption is lower at the time of their death.

This Anti-Clawback rule is the cornerstone of modern tax strategy for high-net-worth families. It provides the legal certainty needed to move large sums of wealth into irrevocable structures today. By making a completed gift now, you effectively freeze the value of those assets for estate tax purposes and lock in the current high exemption.

Strategic Vehicles: SLATs and GRATs

Moving $15 million or more out of a taxable estate requires more than a simple check, it requires sophisticated trust architecture. One of the most popular tools for married couples is the Spousal Lifetime Access Trust (SLAT). A SLAT allows one spouse to gift assets to an irrevocable trust for the benefit of the other spouse, removing the assets from the taxable estate while maintaining indirect access to the funds.

Another powerful tax strategy involves the use of Grantor Retained Annuity Trusts (GRATs). As noted in analysis by Morgan Lewis regarding 2025 exemption amounts, GRATs allow grantors to transfer the appreciation of an asset to heirs with minimal or zero use of their lifetime exemption. This is particularly effective for high-growth assets like tech stocks or interests in a rapidly expanding private company.

Protecting Business Interests and Valuation Discounts

For business owners, the $15 million threshold is often tied up in the fair market value of their enterprise. Strategic tax planning for business interests frequently involves the use of valuation discounts for lack of marketability and lack of control. By gifting minority interests in a family limited partnership (FLP) or an LLC, you can often discount the value of the gift for tax purposes.

This allows you to transfer a larger percentage of the company while staying under the $13.99 million individual exemption. If a business valued at $20 million is gifted in smaller, non-controlling chunks, the discounted value may fall entirely within the current exemption limits. This removes the entire $20 million enterprise from your taxable estate before the 2026 sunset occurs.

The High Cost of Procrastination

Executing these strategies is not an overnight process. It requires qualified appraisals for real estate and business interests, the drafting of complex trust documents, and the formal transfer of titles. As December 31, 2025, approaches, the demand for specialized estate attorneys and tax strategists is expected to skyrocket.

Waiting until the fourth quarter of 2025 to begin your planning could lead to rushed decisions or, worse, the inability to find a qualified professional with availability. Furthermore, the IRS requires completed gifts to be documented properly within the calendar year. Missing the deadline by even a single day could result in the loss of millions in potential tax savings.

Coordinating Your Professional Team

Successful wealth preservation requires a synchronized effort between your legal counsel, your financial advisor, and a specialized tax strategist. A proactive tax planner doesn’t just look at the forms, they look at the long-term impact of legislative changes on your specific portfolio. They can help you determine which assets are best suited for gifting and which should be held to receive a step-up in basis at death.

The $15 million threshold represents a unique historical moment in U.S. tax law. We are currently in a golden age of gifting that is mathematically unlikely to return in our lifetime. Taking control of your financial future means recognizing that the rules of the game are about to change and positioning your assets accordingly.

Take Action with a Top-Tier Strategist

Navigating the complexities of the 2026 sunset requires more than just standard accounting; it requires a high-level tax strategy tailored to your specific goals. If you have an estate approaching or exceeding the $15 million threshold, the time to consult with an expert is now. Visit the Top Tax Planners Directory today to connect with a rigorously vetted and verified tax strategist who can help you lock in your exemption and protect your family’s wealth for generations to come.