What Happened to the 2026 Estate Tax Exemption Sunset?

By David Frederickson · Licensed Life Insurance & Annuity Agent · Licensed in 30 states and Washington, D.C. · FL License #W827787 · Based in Deerfield Beach, FL · Last reviewed October 28, 2026

For about eight years, estate planning conversations came with a countdown clock. The higher federal estate tax exemption from the 2017 tax law was scheduled to "sunset" at the end of 2025, and families across the country planned around that date.

Then the date came and went, and the exemption didn't drop. This post explains what happened to the 2026 estate tax exemption sunset, what the IRS says the 2026 number is, and why the real question for many families was never the deadline. It was whether their heirs would have cash when the bill came due. For the full picture of how life insurance fits in, start with our guide to how an ILIT can help heirs pay estate taxes.

One thing up front: I'm a licensed life insurance and annuity agent, not an attorney, CPA or financial planner. This is general education, not tax or legal advice. The federal estate tax applies in every state; state estate and inheritance taxes vary by state, and the Florida note below applies only to Florida. Please review your own situation with a qualified tax or legal professional.

What was the 2026 estate tax sunset supposed to be?

The 2017 tax law roughly doubled the federal estate and gift tax exemption, but only for deaths and gifts from 2018 through 2025. Without new legislation, the exemption was scheduled to fall back to the lower pre-2018 level, adjusted for inflation, starting January 1, 2026. That scheduled drop was the "sunset."

Under the old wording of Internal Revenue Code §2010(c)(3), the base exemption was $5 million, indexed for inflation. The 2017 law added a temporary rule that substituted $10 million for that base, for estates of people dying and gifts made after December 31, 2017, and before January 1, 2026. When that temporary rule expired, the base would have reverted to $5 million. The Congressional Research Service (CRS) noted the exemption had been projected to be about $7.14 million in 2026 if the sunset had happened.

That gap is why the sunset got so much attention. A family whose estate sat comfortably under the 2025 exemption could have found itself above the line a year later without anything about the family changing.

Did the estate tax exemption drop in 2026?

No. Public Law 119-21, signed July 4, 2025, rewrote the exemption before the sunset took effect. According to the IRS, the basic exclusion amount for people who die in 2026 is $15,000,000. That's higher than the 2025 amount of $13,990,000, not lower.

The IRS's "What's new — Estate and gift tax" page puts it plainly: the law "amends § 2010(c)(3) by increasing the basic exclusion amount to $15,000,000 for calendar year 2026." The IRS calls the legislation the Working Families Tax Cuts; during the 2025 debate many people knew the bill as the "One Big Beautiful Bill Act."

You can check the change in the law itself. Section 70106 of Public Law 119-21 replaced "$5,000,000" with "$15,000,000" in §2010(c)(3)(A) and struck the temporary 2018–2025 rule. It applies "to estates of decedents dying and gifts made after December 31, 2025."

The same IRS page lists the 2026 annual gift tax exclusion at $19,000 per recipient, unchanged from 2025.

Is the new estate tax exemption permanent?

The current statute has no scheduled expiration date, unlike the 2017 version. Starting with deaths after 2026, the $15,000,000 base is adjusted for inflation each year. But "no sunset" isn't the same as "never changes." Congress can amend the estate tax at any time, as it has many times.

Under §2010(c)(3)(B) as amended, the inflation adjustment uses calendar year 2025 as its base and is rounded to the nearest $10,000. The IRS publishes each year's figure.

What that means in practice: the countdown clock is gone, but estate tax law is still law that Congress can rewrite. That's a reason to review your plan on a regular schedule, not a reason to rush.

What about married couples and portability?

Each spouse has his or her own basic exclusion amount. Under portability, a surviving spouse may be able to use the deceased spouse's unused exclusion, but only if the executor elects it on a timely filed estate tax return. Whether that election makes sense is a question for your estate attorney and CPA.

The IRS notes that, since 2011, estates of decedents survived by a spouse "may elect to pass any of the decedent's unused exclusion to the surviving spouse," and that the election is made on a timely filed estate tax return. The statute adds that the election, once made, is irrevocable.

Portability is one reason some families don't need a federal estate tax return for tax purposes but file one anyway. That's a decision your attorney and CPA should make with you, because it depends on your assets, your marriage and your goals.

Does your state have its own estate or inheritance tax?

It depends on where you live and where you own property. Most states don't have one. For 2026, the Tax Foundation counts 12 states and the District of Columbia with an estate tax and five states with an inheritance tax. Rules vary by state and change often, so ask your attorney about each state involved.

Several of those states set their exemptions well below the federal amount, so an estate that owes no federal tax may still owe a state one. That matters for snowbirds and for families who keep a home in another state. If you own real estate in a state with its own estate or inheritance tax, ask your attorney how that state's rules apply to you.

If you live in Florida

Florida doesn't have a state estate tax. According to the Florida Department of Revenue, a federal change eliminated Florida's estate tax for people who died after December 31, 2004. Florida residents generally deal only with the federal estate tax, though property you own in another state may be subject to that state's rules.

If the sunset is gone, do I still need estate liquidity planning?

Possibly, yes. Estates above the exemption can still owe federal estate tax, and CRS describes the tax as 40 percent on amounts above the exemption. Even estates below it often need cash for debts, final expenses, a business transition or treating heirs fairly. Liquidity is about timing and access, not just tax.

Here's a common pattern. The family is "worth" plenty on paper, but the value sits in things that are hard to divide or sell quickly: a business, a commercial building, a waterfront home, a stake in a partnership. When the bills come due, the heirs need cash, and selling the wrong asset at the wrong time can cost more than the bill itself. Life insurance for business owners can help address some of those situations.

That's the lesson of the Joe Robbie estate and the Miami Dolphins, which we cover in the ILIT guide. The higher exemption changes how many families face a federal estate tax bill. It doesn't change how illiquid many estates are.

Where does life insurance fit after the sunset that wasn't?

Life insurance can help put cash in your heirs' hands when it's needed, so they aren't forced to sell what you built. Some families hold the policy in an irrevocable life insurance trust (ILIT) that their attorney drafts. Policy guarantees are backed by the issuing insurer's financial strength and claims-paying ability.

I sell dreams, and for many families the dream is simple: the business stays in the family, the house stays with the kids, and nobody has to hold a fire sale. A policy can be part of how that happens. It isn't a way to avoid taxes, and it isn't right for everyone.

Here's how the work usually divides:

• Your estate attorney decides whether a trust makes sense and drafts it.
• Your CPA advises on the tax side, including whether a portability election may help.
• My role is the insurance side: helping estimate how much coverage may be needed for liquidity, explaining the policy options I'm licensed to offer, managing underwriting, and making sure the right owner and beneficiary are on the application.

Our free Financial Inventory Calculator can help you list what you own and owe before that conversation. It's an organizing tool, not a tax calculation.

If you're reviewing an older plan built around the sunset, that's a good time to bring your attorney, CPA and insurance agent into the same conversation. There's no deadline here. Take the time to get it right.

Frequently asked questions

Talk it through with a licensed agent

If your estate plan was built around the sunset, it may be worth a fresh look with your attorney and CPA. When you're ready to talk about the insurance side, book a free call with David or call (850) 612-8175. He's a licensed life insurance and annuity agent based in Deerfield Beach, Florida, licensed in 30 states and Washington, D.C., and meets with clients by phone and video. Bring your questions, and your attorney if you like.

Related reading: how an ILIT can help heirs pay estate taxes · Financial Inventory Calculator

Sources

1. IRS, "What's new — Estate and gift tax" (2026 basic exclusion amount; 2025 amount; annual exclusion; portability), page last reviewed Jul 23, 2026: https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax
2. Public Law 119-21, §70106 (July 4, 2025), via Congress.gov: https://www.congress.gov/119/plaws/publ21/PLAW-119publ21.htm
3. 26 U.S.C. §2010, Unified credit against estate tax (Cornell LII): https://www.law.cornell.edu/uscode/text/26/2010
4. Congressional Research Service, "Tax Provisions in P.L. 119-21, the FY2025 Reconciliation Law" (R48611): https://www.congress.gov/crs_external_products/R/PDF/R48611/R48611.1.pdf
5. Florida Department of Revenue, "Florida Estate Tax" (Florida section): https://www.floridarevenue.com/taxes/taxesfees/Pages/estate_tax.aspx
6. Tax Foundation, "Estate and Inheritance Taxes by State, 2026" (Oct. 12, 2026; 12 states plus D.C. with an estate tax, five with an inheritance tax): https://taxfoundation.org/data/all/state/estate-inheritance-taxes/

Sources checked Oct 26, 2026 (Tax Foundation added 1:30 PM ET).

Important information: This post is general educational information only. It is not tax, legal or financial planning advice, and tax laws can change. Please consult a qualified tax or legal professional about your situation. Life insurance coverage is subject to underwriting. Policy guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. David Frederickson is a licensed life insurance and annuity agent, FL License #W827787, not a financial planner, financial advisor, attorney or CPA.