For nearly a decade, sophisticated estate planners worked under a ticking clock. The lifetime exemption that doubled under the 2017 tax reform was set to expire at the end of 2025, and forecasts had it dropping back to roughly $7 million per person — about half of where it stood. Wealthy clients raced to fund irrevocable trusts. Attorneys booked weekend meetings. Whole estate-planning practices were rebuilt around what the industry called "the cliff."
Then the cliff disappeared. The One Big Beautiful Bill Act, signed into law in mid-2025, raised the federal estate, gift, and generation-skipping transfer (GST) tax exemption to $15 million per individual starting January 1, 2026, indexed for inflation beginning in 2027, with no scheduled sunset. For couples, that's $30 million sheltered from federal transfer taxes. The 40 percent top rate stays put, and the annual gift exclusion creeps up to $19,000 per recipient.
If you spent the last three years planning around a cliff, this is not a cue to stand down. It's a cue to rebuild your plan for a world where the exemption is permanent — and where the strategies you locked in under different assumptions may no longer be the right fit.
What the New Law Actually Says
Strip away the marketing copy and the new rules come down to a small number of structural changes. They matter enormously, but they're not complicated.
- $15 million unified exemption per individual. This single exemption covers lifetime taxable gifts and the estate tax. Lifetime gifts that exceed the annual exclusion eat into this number; whatever's left at death shelters your estate.
- $30 million for married couples. Through portability — which still requires a timely-filed Form 706 — a surviving spouse can claim the deceased spouse's unused exemption (DSUE).
- $15 million GST exemption per individual. This separate exemption shields transfers to grandchildren and more remote generations from the additional 40 percent generation-skipping transfer tax. Crucially, the GST exemption is not portable between spouses. If your spouse dies without allocating their GST exemption, it's gone.
- Inflation indexing starts in 2027. The 2026 figure is a flat $15 million; subsequent years adjust upward using 2025 as the base year.
- 40 percent top rate unchanged for amounts above the exemption.
- Annual gift exclusion rises to $19,000 per recipient in 2026 ($38,000 for split gifts by married couples).
What's gone is the looming reversion. What's stayed is everything else: the same trust structures, the same Section 7520 hurdle rates, the same reciprocal trust doctrine, the same Form 709 paperwork. Permanence simplifies the deadline; it does not simplify the technique.
Why the Plan You Built for the Cliff May Need a Rebuild
Many high-net-worth families spent 2023, 2024, and 2025 doing one or more of the following: front-loading lifetime gifts into spousal lifetime access trusts (SLATs), funding dynasty trusts to lock in GST exemption, executing aggressive grantor retained annuity trust (GRAT) strategies, and accepting trade-offs they would not have accepted absent a hard deadline.
That urgency was rational. It was also expensive in ways that may now be worth revisiting:
- Loss of step-up in basis. Lifetime gifts carry the donor's cost basis. The recipient (or the trust) inherits unrealized gain. Assets held until death receive a basis step-up to fair market value. For appreciated assets — concentrated stock, founder shares, real estate — gifting in 2024 may have saved 40 percent transfer tax while costing 23.8 percent capital gains tax to a beneficiary who sells. The math only works when the long-run appreciation expected outweighs the basis cost.
- Illiquid lockup. Assets in an irrevocable trust are not available to the donor. Families who pushed close to the exemption to lock in the "use it or lose it" benefit now own less of their own balance sheet than they may want.
- Reciprocal trust exposure. Couples who created two SLATs that look too similar may be sitting on a structural defect the IRS can unwind under the reciprocal trust doctrine, pulling the assets back into both estates.
None of this means past planning was wrong. It means the assumptions have changed, and the next set of decisions should reflect the new ground truth: there is no deadline, but there are still very real reasons to use the exemption thoughtfully.
Recalibrating SLATs Under a Permanent Exemption
The SLAT is still the workhorse for married couples who want to use exemption while preserving indirect access through a spouse. Two changes to your thinking should follow from permanence.
You no longer have to use it all at once. Pre-OBBBA, the case for funding a SLAT to the full exemption was that any unused amount would vanish at the cliff. That argument is now gone. Funding a SLAT to a comfortable level — say, $5 to $10 million per spouse — and preserving the rest for later use, or for assets that grow into the exemption, is now a defensible plan.
Differentiating SLATs matters more, not less. Because permanence removes time pressure, there is no excuse for two cookie-cutter trusts created on the same day. To avoid reciprocal trust doctrine attack, the two trusts should differ on multiple dimensions, not just one:
- Timing: Execute trusts months — ideally a year — apart, with different funding events.
- Trustee structure: Use independent corporate trustees, with removal-and-replacement powers held by different parties.
- Distribution standards: Pair a Health, Education, Maintenance, and Support (HEMS) standard with a discretionary "best interests" standard administered by a third-party trustee.
- Powers of appointment: One trust may grant a testamentary limited power of appointment; the other may omit it or condition it on a trust protector's consent.
- Beneficiary class and remainder: Vary the contingent beneficiaries and remainder provisions.
The standard advice — "make them different" — is too vague. A defensible plan touches at least three of the dimensions above. Document the rationale, and don't sign both trusts in the same week.
GRATs in a 4.6 Percent Section 7520 World
Grantor retained annuity trusts work when the assets inside the trust outperform the Section 7520 rate published monthly by the IRS. With Section 7520 hovering near 4.6 percent in early 2026, the hurdle is meaningfully higher than the sub-2 percent rates that made the technique nearly automatic during the 2020–2021 window.
That does not retire the GRAT. It changes when to use it.
- Volatile, high-growth assets — concentrated public stock with a near-term catalyst, pre-IPO equity, recent rollover positions — remain strong GRAT candidates. The point of a zeroed-out GRAT is that the downside is limited (you simply get the assets back) while the upside passes outside the estate.
- Short-term, rolling GRATs smooth out market timing risk. Two-year terms with annual roll-overs let appreciation in one term lock in even if the next term underperforms.
- The GRAT does not consume meaningful exemption when zeroed out, which means it stacks with — and does not crowd out — your SLAT and dynasty trust planning. Permanence makes that stacking strategy more valuable, not less.
If you have appreciated illiquid assets that you expect to outperform 4.6 percent annual growth, GRATs remain the lowest-cost technique for shifting that excess return to heirs.
The GST Exemption: Permanent, Personal, and Easy to Waste
This is the most under-appreciated feature of the new law. The $15 million GST exemption is per individual, not portable to a surviving spouse, and not automatically allocated to every trust. Three planning consequences follow.
- Allocate GST exemption deliberately. The "automatic allocation" rules cover direct skips to grandchildren but not most transfers to trusts that could benefit grandchildren. Form 709 elections — affirmative allocations or opt-outs — should be reviewed annually with counsel.
- Use GST exemption while both spouses are alive. If one spouse dies with $15 million of unused GST exemption, it disappears. Funding GST-exempt trusts during life — even modestly — locks in the higher generation-skipping shelter that portability cannot rescue.
- Dynasty trusts compound the value. A trust that is fully GST-exempt at funding can grow for generations without ever triggering the 40 percent generation-skipping tax. In a state that permits perpetual trusts — Delaware, South Dakota, Nevada, and others — the savings over a century can dwarf the savings over one generation.
If you do nothing else with the new law, allocate GST exemption intentionally and on both sides of a marriage.
Lifetime Gifting Strategies That Still Make Sense
Even with the exemption permanent, several techniques produce after-tax benefits that are hard to replicate later:
- Annual exclusion gifts ($19,000 per recipient in 2026, $38,000 if split with a spouse) do not use lifetime exemption. A family with three children and seven grandchildren can transfer $760,000 per year without filing a gift tax return.
- 529 plan superfunding lets a donor front-load five years of annual exclusion gifts ($95,000 per beneficiary in 2026) into education savings, with the entire amount treated as completed gifts that grow tax-free.
- Tuition and medical payments made directly to the institution or provider are unlimited and don't count against exemption or annual exclusion — useful for grandparent-funded private school or family medical expenses.
- Discount entity transfers. Gifts of minority interests in family limited partnerships or LLCs holding investment assets can claim valuation discounts for lack of control and lack of marketability, leveraging the dollar value of exemption used.
What to Do This Year
The window for panicked, deadline-driven decisions is closed. The window for deliberate, multi-year planning is wide open. A reasonable 2026 work plan looks like this:
- Audit existing trusts. Pull every irrevocable trust funded in the last three years. Verify reciprocal trust doctrine differentiation, GST exemption allocation, and whether the trust is still aligned with current family circumstances.
- Re-run the basis math. For each large gift contemplated, model the long-run after-tax outcome against the basis step-up alternative. The answer depends on holding period, appreciation rate, and the likely state of capital gains rates.
- Sequence future gifts. Map out a three- to five-year gifting calendar rather than a single 2026 transfer. This preserves liquidity, smooths reciprocal trust risk, and allows GRAT and SLAT layering.
- Coordinate state taxes. Twelve states and the District of Columbia impose their own estate taxes, several with exemptions well below $15 million. New York, Massachusetts, Oregon, and Washington in particular require state-specific planning even when federal tax is fully sheltered.
- Update Form 706 protocols. Portability requires a timely-filed federal estate tax return on the first spouse's death, even when no tax is due. Many surviving spouses lose DSUE simply because the return was never filed.
The Recordkeeping Discipline Behind Every Good Estate Plan
Sophisticated estate planning depends on records that survive decades and outlive memories. Gift tax returns, valuation reports, trust funding documents, basis schedules for gifted assets, and GST exemption allocation elections all need to be preserved and findable — not just by you, but by your spouse, your trustees, your accountants, and eventually your heirs.
Plain-text, version-controlled financial records are quietly well-suited to this. A ledger that lives in human-readable files, tracks the cost basis of every transferred lot, and preserves a complete audit trail of every transaction is exactly the kind of artifact that holds up across a generational time horizon. Spreadsheets become orphaned. Proprietary databases become inaccessible. Plain text endures.
Keep Your Family Financial Records Built to Last
A $15 million exemption is permanent only if Congress leaves it alone. Your records need to be permanent regardless. Beancount.io provides plain-text accounting that is transparent, version-controlled, and AI-ready — exactly the foundation an estate plan needs when the assets, the trusts, and the people involved will be around for decades. Get started for free and build a financial record your heirs will thank you for.