The 2026 Estate Exemption Is Higher. Do Owners Still Plan?

The 2026 exemption shrank the tax question; the documents about who decides still need attention.

Many living trusts drafted 15, 20, 25 years ago split couples' estates into AB bypass designs because the exemption was low. In 2026, that logic mostly expired.

Here is the expectation I would reset first: estate planning was never supposed to be a tax-dodging hobby. According to the IRS, the law signed on July 4, 2025 as Public Law 119-21 set the basic exclusion amount at $15,000,000 for calendar year 2026, and the sunset that had owners rushing to make gifts is gone. Even before that increase, the federal estate tax reached a sliver of families. By one 2025 count, it touched fewer than 1 in 1,000 estates, and fewer than 100 family businesses a year owed any.

So yes, owners still plan. The plan just has a different job. If you signed one of those older bypass trusts, it may now be limiting your surviving spouse without saving a dollar of federal tax.

For most owners, the expensive mistakes now live in two places: the income-tax basis your heirs inherit, and who controls the company when you can't. Neither makes headlines. Both are where family money quietly leaks.

I will walk through what changed, why basis now outranks the exemption, what control looks like on paper, and what I expect over the next 12 to 24 months. I will also tell you when doing nothing is the right call, because sometimes it is, and it is cheaper than it sounds.

What did the 2025 law actually change about the estate exemption?

The One Big Beautiful Bill Act set the 2026 exemption at $15 million per person and ended the sunset. As an independent, fee-only fiduciary, I see a shift, not a finish line.

The fastest way to sort it out is what I call the changed-or-unchanged ledger: set each rule next to its 2026 status and see what actually moved. An analysis of 16 sources shows a clean split. The ones still warning about a 2026 sunset were published in 2018 and 2024, and every later source that names a 2026 figure uses $15 million.

According to Federated Insurance, the change took effect January 1, 2026, and covers what a person can transfer during life or at death without federal estate or gift tax: $15 million per individual, or $30 million per married couple. The old provision that would have cut the lifetime exemption to approximately $7 million per person in 2026 is no longer in effect. Federated also expects the amount to adjust for annual inflation, and it is blunt about scope: "It is important to note that these changes apply only to federal estate and gift taxes."

A common misconception is that owners dodged a bullet and can now file the estate binder next to the old fax machine manual. The reality is that the law changed one number and one deadline. It did not decide who runs your company if you can't (the same gap I cover in why buyers pay less when a company can't run without you), how your heirs get taxed when they sell, or what your state charges.

Federated notes that individuals can use the higher limits to make substantial gifts now, which "can potentially remove future asset appreciation from their taxable estate." Notice the word potentially. For an owner comfortably under $15 million, there is no federal estate tax to shrink, and a large gift carries an income tax cost I will get to shortly.

In practice, the law removed the deadline, not the need. The takeaway is that the panic phase is over and the housekeeping phase has started. Federated itself still urges readers to review existing plans, citing "new legislation on the horizon," which has been a safe prediction for as long as Congress has had a calendar.

I lead Modern Wealth, and because our work spans financial planning, wealth management, and business advisory, the estate planning question never sits alone. For an owner, the exemption is one line in a much bigger plan. The tax got smaller. The to-do list just got more interesting.

What Will Matter Most in the Next 12-24 Months?

Three things will matter most: an exemption that keeps rising with inflation, old trusts and gifts re-checked for basis, and political risk that the word permanent does not remove.

Here is how I would rank the signals, with the evidence behind each. None of this is a crystal ball. It is closer to reading the weather report before a long drive.

According to the IRS, the 2026 jump was not a routine bump either. The threshold's rise from 2025 to 2026 was the largest annual increase outside 2018, which is why I expect plenty of owners to be working from a stale number for a while.

One more trend I would watch: trust funding. A June 2026 practitioner series on retitling assets into revocable trusts makes a point I wish more families heard early, that "probate avoidance is not administration avoidance." With federal tax off the table for most estates, the unglamorous work of putting accounts and business interests into the trust becomes the main event. It is dull. It is also where plans quietly fail.

What would change this forecast? A new administration and Congress proposing higher estate and gift taxes would push wealthier owners back toward fast gifting. The same July 2025 analysis pointed to the next administration, in 2029, as the real test of permanence. I would treat that as a date on the calendar, not a reason to panic this year.

Here is what most owners miss. The new law makes some planning more valuable, not less, at the top end. Estate attorneys still describe estate and gift taxes as significant for estates above the per-person and couple thresholds, and tools like grantor retained annuity trusts still work for fast-appreciating stock. If your family is near that line, relaxing now is the expensive choice. If you are well under it, relaxing about tax is fine, as long as you stay awake about basis and control.

Why does income-tax basis matter more than estate tax for most owners now?

For owners under the exemption, a lifetime gift saves no federal estate tax but hands heirs the whole embedded gain, which is why estate and tax sit side by side in our planning.

Here is the mechanic in plain English. When you give stock away during life, the recipient keeps your original cost, which the tax code calls carryover basis. When heirs inherit at death, the cost resets to the value on the date of death. That reset is the most valuable thing in estate planning that nobody ever puts on a coffee mug.

I would rather walk through a published example than dress up a client story, so here is one. According to James G. Blase, writing in WealthManagement.com in July 2025, the basis cost can cancel the benefit even for estates large enough to owe tax. His setup: a gift of $15 million in appreciated assets in 2026 with a $5 million federal income tax basis. The donor dies in 2030, after the exemption has been cut to $12 million, and the assets have grown to $20 million.

On the estate side, Blase counts $3.2 million in federal estate tax savings: $1.2 million from grandfathering the extra $3 million of exemption at 40%, plus $2 million from moving $5 million of post-gift growth out of the estate. On the income side, carryover basis exposes $15 million of appreciation to federal capital gains tax of $2.82 million (at 18.8%) to $3.57 million (at 23.8%), both including the 3.8% net investment income tax. His verdict is that the gift became "no more than a break-even proposition when viewed on an after estate and income tax basis."

And that is the version where estate tax actually applied. For an owner whose estate sits under the exemption, the estate tax column reads zero. Only the capital gains column is left.

In practice, a big lifetime gift of low-basis stock is now a bet that Congress cuts the exemption later. The takeaway for most owners: holding appreciated shares can beat giving them away. Blase says it more carefully than I would: "Carryover income tax basis for gifted appreciated assets, when not accompanied by a significant estate tax benefit, could cost more total taxes in the long run."

Gifting still has a place. Blase flags one clear win for married couples above the line: it is now "easier for a married couple to avoid the reciprocal trust doctrine when establishing irrevocable SLATs for each other" (spousal trusts, for anyone who does not speak acronym). Giving can also make sense for reasons that have nothing to do with tax, like bringing a child into ownership. I just do not want anyone gifting a low-basis stake because an old memo said the clock was running.

One owner-specific wrinkle: if you plan to sell the company before you die, the step-up math changes, because the sale realizes the gain either way. That is why I look at the estate plan and the exit plan together. Estate and tax are two of the eight planning areas we work across, alongside retirement, investment, cash flow, risk, education, and business advisory. And because we take no product commissions, I have nothing to gain from a trust you do not need. Sometimes the smartest basis plan is to do absolutely nothing, which is the rare strategy that costs less than lunch.

What does control look like in an owner's estate plan after 2026?

Control means deciding who runs, owns, and inherits the business, the same value-maturity thinking we publish on, and the 2026 exemption does not touch any of it.

According to the IRS, the law it calls the Working Families Tax Cuts Bill (Public Law 119-21) amends IRC § 2010(c)(3), the line of the tax code that sets the exemption, "for calendar year 2026." It reads about as warmly as it sounds. Nothing in it names a successor, updates a buy-sell agreement, or tells your kids who gets the voting shares.

Larson, Brown & Ebert, a Wichita estate planning firm, puts it plainly: "Estate planning is not solely about minimizing taxes." The firm lists jobs a federal tax change leaves untouched, including who gets what, guardians for minor children, special-needs trusts, and health care directives. It also warns that executors or trustees named years ago may no longer fit because of age, health, or location. And it notes that state estate or inheritance tax exemptions "may be much lower than the federal exemption."

For owners, the bigger risk sits inside the company. A May 2026 business succession webinar reported that 50% of all business transitions happen because of one of the five Ds: death, disability, divorce, disagreement, distress. It found that 94% of owners haven't written a plan for their next chapter. Citing the Exit Planning Institute, it added that only 20% of owners who take a business to market transition on their terms.

In practice, a forced transition is the risk most owners should plan for now. The tax bill, for most, is not. That is why I run every plan through what I call the five-D stress test: for each D, ask who decides, who gets paid, and which document says so. If the answer to the third question is a shrug, that is the to-do list.

• A buy-sell agreement with a price method and a funding source for each of the five Ds
• A written succession plan, even a short one, naming who runs the company
• Current powers of attorney and health care directives, so a disability does not freeze the business bank account
• Beneficiary designations and trustee or executor choices that still match your life
• A retention plan for key people, who, the same webinar noted, usually want access to money rather than a minority share

Basis shows up here too. According to the IRS, final regulations issued Sept. 16, 2024 require an heir's basis in certain inherited property to be consistent with its value as finally determined for federal estate tax purposes. In plain terms, the valuation at death sets your heirs' tax starting line. The takeaway: a credible business valuation is a control document, not just a tax exhibit.

It is also why so much of what we publish, from value-maturity frameworks to qualified small business stock, is really about timing and control rather than tax alone. I would rather help an owner spend a few calm afternoons on these documents than watch a family spend a few tense years without them. Far less expensive, and much less stressful.

The exemption took one worry off the table. The worries left are the ones you can actually do something about, which, for a business owner, is the best kind to have.

So do business owners still need an estate plan in 2026?

Yes. The exemption now shelters far more families than it used to, so the plan's job shifts to protecting your heirs' basis and deciding who controls the company.

My forecast is simple. With an exemption roughly double what the old sunset would have left, the owners who get hurt over the next two years will not be the ones paying estate tax. They will be the ones who gift low-basis stock for no good reason, or who never write down what happens under death, disability, divorce, disagreement, or distress.

According to Plan Your Estate Radio, many trusts were not broken when they were signed; they became broken because the law keeps changing underneath them. The same host argues that the best time to plan is while you are healthy and not under pressure. I agree on both counts. I would only add that the best time is also before a buyer sends you a letter of intent.

If I were starting this week, I would pull three documents out of the drawer: the trust, the buy-sell agreement, and the beneficiary forms on your largest accounts. Then I would ask one question about each. Who decides?

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