The $15 Million Estate Tax Exemption: What Changed In 2026, And What Still Catches Families Out

The Short AnswerFor deaths in 2026, the federal estate tax applies only to the part of an estate above a basic exclusion of $15 million per person, and a married couple can shelter up to $30 million by electing portability. Above that line the tax reaches 40%. The higher exemption removed most families from the tax, but estates that are large, growing quickly, or holding life insurance in the wrong name can still owe a great deal, and the bill is due in cash.

The Number For 2026

For people who die in 2026, the federal basic exclusion amount is $15,000,000. An estate worth less than that, after deductions and after counting lifetime taxable gifts, owes no federal estate tax. The part above it is taxed on a graduated schedule that reaches 40%, and at the estate sizes where the tax applies, nearly every taxable dollar is taxed at that top rate.

Two related numbers are worth knowing. The same exclusion covers lifetime gifts and estates together, so large gifts during life use it up. And gifts of up to $19,000 per recipient in 2026 fall under the annual exclusion and do not use it at all.

What It Means For A Married Couple

A married couple can shelter up to $30 million, but only if the paperwork is done. When the first spouse dies, the surviving spouse can keep the unused part of that spouse’s exclusion, the deceased spousal unused exclusion, through an election called portability. The election is made on a timely filed federal estate tax return, Form 706, even when no tax is owed. Families who skip the return because the first estate owed nothing can lose the second $15 million of shelter.

Why Families Under The Line Still Owe

The Estate Keeps Growing

The exclusion is indexed for inflation in later years, but a business, real estate or an investment portfolio can grow much faster. The gap compounds. In the calculator’s opening example, a married couple aged 55 with $40 million growing at 5% a year, against an exemption indexed at 2.5%, faces a federal estate tax of $4 million today, $10.7 million at 65 and $22.8 million at 75.

CalculatorRun your own estate through the projection→

Life Insurance In The Wrong Name

Life insurance proceeds are generally free of income tax for the beneficiary. They are a separate matter for estate tax. If the insured person held any of the incidents of ownership at death, such as the right to change the beneficiary, borrow against the policy or cancel it, the full death benefit is counted in the insured’s estate. A $10 million policy owned by the insured can add $10 million to a taxable estate. Ownership, typically through a properly drafted trust, is a question for the estate attorney before a policy is issued.

Retirement Accounts Carry Two Taxes

Most assets that pass at death receive a new cost basis equal to their value on the date of death, which erases built-in capital gains for heirs. Pre-tax retirement accounts do not work that way. Heirs owe income tax on the withdrawals as income in respect of a decedent, and most non-spouse heirs must empty an inherited account within ten years. A large IRA or plan balance in a taxable estate can therefore face estate tax and income tax on the same dollars. That combination is one reason The Second Bill matters most for families near the exemption.

The Tax Is Due In Cash

The estate tax is generally due nine months after death. Estates concentrated in a business, farmland or real estate can be asset-rich and cash-poor, and a forced sale on a deadline rarely gets the best price. Planning for liquidity, whether through cash reserves, a buy-sell arrangement or life insurance owned outside the estate, is as important as planning for the amount.

What About California?

California does not impose a separate estate or inheritance tax. Its estate tax was tied to a federal credit that no longer exists, so it collects nothing. California residents face the federal estate tax only. Other states do have their own estate or inheritance taxes, often with far lower exemptions, which matters for anyone who owns property or plans to retire elsewhere.

Where Tyler Fits

Tyler does not draft wills or trusts; that is the estate attorney’s work. He brings the estate exposure into the same picture as today’s income tax and the Second Bill, and designs the insurance and funding pieces a plan may need, including how a policy should be owned, for review by the family’s attorney and CPA.

About The Author

Tyler Ostrovsky founded 19th Hole Financial after eight years as a professional golfer, including status on PGA Tour Canada. He builds tax strategy and advanced life insurance plans for high earners and works alongside their CPAs and attorneys.