For years, estate planners worked under a ticking clock: the elevated exemption from the 2017 tax law was scheduled to sunset at the end of 2025, dropping the per-person exclusion from roughly $14 million back to an inflation-adjusted figure near $7 million. The One Big Beautiful Bill Act (OBBBA), signed in July 2025, removed that cliff. It set the unified estate and gift tax exemption at $15 million per individual for 2026 — effectively $30 million for a married couple — and made that baseline permanent, indexed for inflation in future years rather than expiring.
The practical result: the vast majority of families will never owe federal estate tax, and the planning conversation shifts from "beat the sunset" to "use the tools that are now durable." The federal estate tax rate above the exemption remains a flat 40%. The exemption is unified, meaning the same lifetime allowance covers both gifts you make while living and transfers at death — every dollar of lifetime gifting above the annual exclusion draws down the same $15 million bucket. Understanding portability, the annual exclusion, and how the pieces stack is what separates a plan that captures the full $30 million from one that accidentally leaves millions on the table.
What the permanent exemption actually changed
Before OBBBA, the higher exemption was a temporary feature scheduled to expire after 2025. Planners raced to "lock in" the elevated amount through large lifetime gifts, worried that the exemption would be cut roughly in half in 2026. OBBBA eliminated that urgency by fixing the number at $15 million and declaring it permanent.
"Permanent" in tax law means no scheduled sunset — it stays until Congress affirmatively changes it, and it adjusts for inflation each year. That's a meaningful shift in posture: aggressive, deadline-driven gifting is no longer forced by the calendar.
Under the old sunset (pre-OBBBA)
- Exemption scheduled to drop to ~$7M per person in 2026
- Deadline-driven gifting to lock in the higher amount
- Uncertainty made long-term planning hard
- Fear of a use-it-or-lose-it cliff
Under OBBBA (2026 forward)
- $15M per person, permanent and inflation-indexed
- Gifting driven by strategy, not a deadline
- Durable baseline for multi-year planning
- No cliff — the exemption grows over time
For most households, the headline is simple: with a $15 million per-person exemption, a federal estate tax bill is now a concern only for genuinely large estates. But state estate and inheritance taxes are separate — several states impose their own with far lower thresholds, and that's where residency matters.
The Florida advantage — no state estate or income tax
Florida imposes no state estate tax and no state inheritance tax, and no state income tax on individuals. A number of other states levy estate taxes with exemptions far below the federal $15 million — some as low as $1 million to $2 million — so a family that would owe nothing federally can still face a six- or seven-figure state estate tax elsewhere.
Domicile is a planning lever, not just a lifestyle choice. Because Florida has no estate, inheritance, or state income tax, establishing genuine Florida residency can remove an entire layer of transfer tax that other states impose at much lower thresholds. MK Tax & Accounting works with clients across South Florida, so residency and domicile questions come up constantly — and the documentation to support a domicile change matters if a former state pushes back.
Portability: how a couple captures both exemptions
Married couples get two exemptions — but only if they claim them correctly. Portability lets a surviving spouse inherit the unused exemption of the first spouse to die. That transferred amount is called the DSUE (Deceased Spousal Unused Exclusion). Without portability, any exemption unused by the first estate is simply lost.
The catch: portability is not automatic. The executor of the first spouse's estate must file Form 706 (the federal estate tax return) and affirmatively elect portability — even when the estate is far too small to owe any tax. Families routinely skip the 706 because "there's no tax due," and in doing so they forfeit millions of dollars of exemption that would have sheltered the second estate.
First spouse dies
The surviving spouse inherits assets, typically free of estate tax under the unlimited marital deduction.
Executor files Form 706
Even with no tax due, the return is filed specifically to compute and preserve the unused exemption.
Portability election is made
The 706 election transfers the DSUE — the first spouse's unused exemption — to the survivor. The IRS provides a simplified extension for late portability-only filings in many cases.
Survivor's exemption is stacked
The survivor now has their own $15M exemption plus the inherited DSUE, protecting a much larger combined estate.
The single most common portability mistake is not filing Form 706 after the first spouse's death because the estate owes nothing. Filing is the only way to preserve the DSUE. There is a simplified late-election procedure available in many portability-only situations, but relying on it is a gamble — file the 706 on time and the exemption is locked in cleanly.
The annual exclusion — quiet, powerful, and separate
Alongside the $15 million lifetime exemption sits the annual gift tax exclusion: $19,000 per recipient for 2026. You can give up to that amount to as many people as you like, every year, without using any lifetime exemption and without filing a gift tax return. A married couple can split gifts to give $38,000 per recipient annually.
Annual-exclusion gifting compounds. A couple with three children and six grandchildren can move well over $340,000 out of their estate every single year — indexed upward over time — without touching the lifetime exemption at all.
| Gift type | 2026 limit | Uses lifetime exemption? |
|---|---|---|
| Annual exclusion gift (per recipient) | $19,000 | No |
| Gift-split by married couple (per recipient) | $38,000 | No |
| Direct tuition payment to school | Unlimited | No |
| Direct medical payment to provider | Unlimited | No |
| Gift above the annual exclusion | Reduces the $15M | Yes — report on Form 709 |
Two other transfers are unlimited and separate from everything above: direct payments of tuition made to the educational institution, and direct payments of medical expenses made to the provider. Pay a grandchild's college bill directly to the university, and it doesn't count as a gift at all — no annual-exclusion usage, no lifetime-exemption drawdown.
Planning around the threshold
With a permanent $15 million exemption, the question is no longer "how fast can I give it away?" It's "which tools fit my family, and in what order?" A durable exemption rewards patient, layered planning.
- Confirm whether your total estate — including life insurance, retirement accounts, and business interests — approaches the $15M / $30M threshold at all
- For married couples, build a plan that guarantees a Form 706 portability election on the first death
- Use annual-exclusion gifts ($19,000 per recipient) every year to move assets out tax-free
- Pay tuition and medical bills directly to institutions to transfer wealth without using any exemption
- Check your state — Florida has no estate tax, but many states tax estates well below the federal threshold
- Report gifts above the annual exclusion on Form 709 to track lifetime-exemption usage accurately
Even families comfortably under the $15 million threshold should keep clean gift records. Every gift above the annual exclusion is reported on Form 709, and those filings collectively track how much of your lifetime exemption you've used. Good records now prevent a scramble later — and if the law ever changes, you'll know exactly where you stand.
The 2026 estate and gift tax landscape is the most stable it has been in years: a permanent $15 million per-person exemption, effectively $30 million per couple, a flat 40% rate only above that line, and no scheduled sunset. Capture the full benefit by doing three things reliably — file Form 706 to elect portability on the first spouse's death, use the $19,000 annual exclusion every year, and pay tuition and medical costs directly. Add Florida's lack of any state estate or income tax, and a well-structured plan can pass extraordinary wealth to the next generation with little or no transfer tax.
Make the permanent exemption work for your family
MK Tax & Accounting builds estate and gifting strategies around the 2026 rules — portability elections, annual gifting plans, and Form 709 tracking — so your wealth transfers efficiently to the next generation.
Talk to a tax proSources
- One Big Beautiful Bill Act, Pub. L. 119-21 (2025) — estate and gift tax exemption made permanent at $15M per individual
- IRS — Rev. Proc. 2025-32, 2026 inflation adjustments (annual gift exclusion and exemption)
- IRC Section 2001(c) — federal estate tax rate schedule (40% top rate)
- IRS — Estate Tax and Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return
- IRS — Frequently Asked Questions on Gift Taxes and Form 709, United States Gift (and GST) Tax Return
Frequently asked questions
$15 million per individual, or effectively $30 million for a married couple, under the One Big Beautiful Bill Act. This is a permanent baseline indexed for inflation going forward, replacing the scheduled 2026 sunset that would have cut the exemption roughly in half.
When the first spouse dies, the executor can elect portability on a timely Form 706 to transfer the unused exemption — the DSUE, or Deceased Spousal Unused Exclusion — to the surviving spouse. That preserves both spouses' exemptions even if the first estate wasn't large enough to owe tax. The election is not automatic; skipping the return forfeits the DSUE.
The annual gift tax exclusion is $19,000 per recipient for 2026 ($38,000 for a married couple splitting gifts). Gifts within the annual exclusion don't reduce your $15 million lifetime exemption and don't require a gift tax return. Direct payments of tuition or medical bills made to the institution are unlimited and separate.
The federal estate tax is a flat 40% on the taxable amount above the exemption. Because the exemption is now $15 million per person, only estates exceeding that threshold after deductions and portability owe any federal estate tax at all.
