On January 1, 2026, the federal estate tax exemption increased to $15 million per person — $30 million for married couples. It is now permanent, with no scheduled expiration.
If you read that and thought, ‘that doesn’t affect me — my estate isn’t anywhere near $15 million,’ I want to stop you right there. Because that reaction is exactly the problem.
The families who need to pay close attention right now are not the ones with $15 million estates. They are the families with estate plans that were written two, five, or ten years ago under completely different assumptions — plans that may now be technically outdated, structurally misaligned, or quietly working against their wishes.
I am a financial advisor and licensed estate planning attorney in Connecticut and New York. I have been reviewing and drafting estate plans for over 30 years. Right now, in March 2026, I am seeing more plans that need updating than at almost any other point in my career. Not because of a crisis — because the law changed significantly, and most families have not caught up yet.
This post explains what changed, who it affects, and the specific questions every family should be asking their advisor right now — whether your estate is $500,000 or $10 million.
To understand what changed in 2026, you need to understand what almost happened — because many people made significant financial and legal decisions based on a rule change that ultimately never occurred.
In 2017, the Tax Cuts and Jobs Act (TCJA) temporarily doubled the federal estate tax exemption from $5 million to $10 million per person (adjusted for inflation). By 2025, that inflation-adjusted figure had reached $13.99 million per person. Married couples, with proper planning, could shield up to $27.98 million from federal estate tax.
The critical word was ‘temporarily.’ The TCJA included a sunset provision: on December 31, 2025, the doubled exemption was scheduled to expire automatically. Without new legislation, the exemption would have reverted to approximately $7 million per person on January 1, 2026 — essentially cutting it in half overnight.
That pending drop created enormous urgency in estate planning circles. Families rushed to make large gifts, fund irrevocable trusts, and implement complex strategies to lock in the higher exemption before it disappeared. Law firms and financial planners were overwhelmed with clients trying to beat the deadline.
Then, on July 4, 2025, Congress passed and the President signed the One Big Beautiful Bill Act (OBBBA). The law did not just prevent the sunset — it raised the exemption further, to $15 million per person, and made it permanent. No expiration date. No scheduled reduction. Starting in 2027, it will be adjusted annually for inflation using 2025 as the base year.
| What Changed | Details |
| 2025 Federal Exemption | $13.99 million per person / $27.98 million per couple |
| 2026 Federal Exemption | $15 million per person / $30 million per couple |
| Sunset provision | Eliminated — no expiration date under current law |
| Inflation indexing | Begins 2027, using 2025 as base year |
| Annual gift exclusion | $19,000 per recipient (unchanged from 2025) |
| Federal estate tax rate | 40% on amounts above the exemption (unchanged) |
| Step-up in basis at death | Preserved — heirs still receive assets at fair market value |
| Important note on ‘permanent’: Tax attorneys use this word carefully. The OBBBA contains no sunset provision — meaning the $15 million exemption will not automatically reduce. However, a future Congress could change the law at any time. As we have seen twice in the last decade, estate tax rules are subject to political shifts.Planning with the current law while building in flexibility is always the right approach. |
This is the section most financial content gets wrong — and it is directly relevant to many of the families we serve in Connecticut and New York.
The $15 million federal exemption is real and significant. But 18 states and jurisdictions still have their own separate estate or inheritance taxes — with exemptions far below the federal level. If you live in one of those states, or own property there, the federal number provides no protection from state-level exposure.
Good news for CT residents: Connecticut phased out its state estate tax entirely in 2023. CT residents are now only subject to the federal exemption, which means most Connecticut families have effectively no estate tax exposure for 2026. This is a significant planning advantage that residents of neighboring states do not have.
One nuance: Connecticut previously had both an estate tax and a gift tax. The gift tax is also gone. CT residents can now make substantial lifetime gifts without state-level gift tax consequence. This opens planning opportunities that did not exist just a few years ago.
New York has its own estate tax, and it is entirely separate from the federal system. The federal change to $15 million has no effect on New York’s estate tax. For 2026, the New York State estate tax exemption is $7,350,000.
That means a family with an estate worth $8 million pays zero federal estate tax — but still faces significant New York estate tax. And New York’s system has a particularly unforgiving feature that most people have never heard of: the tax cliff.
| Understanding New York’s Estate Tax Cliff — 2026 The New York exemption is $7,350,000 for 2026. If your taxable estate is at or below $7,350,000 → No NY estate tax. If your taxable estate is between $7,350,001 and $7,717,500 → You pay tax only on the excess. If your taxable estate exceeds $7,717,500 (105% of the exemption) → You lose the exemption entirely. Your ENTIRE estate is taxable from dollar one. Example: An estate worth $7.8 million exceeds the threshold by $450,000. Under the cliff rule, the full $7.8 million is subject to NY estate tax. The resulting tax bill: over $745,000 — on an estate only $450,000 over the limit. That is an effective tax rate of over 160% on the amount above the threshold. New York does not allow portability between spouses. Each spouse’s $7.35M exemptionis use-it-or-lose-it — it cannot be transferred to the surviving spouse at death. Source: New York State Department of Taxation and Finance; Twomey Latham LLP analysis |
This is not a theoretical concern. A home purchased 30 years ago in Fairfield County or Westchester County, combined with retirement accounts, life insurance, and investment accounts, can push a family’s estate well into New York tax territory — even for families who would never describe themselves as wealthy.
Because New York does not have a gift tax, one of the most effective strategies for NY-exposed families is lifetime gifting to reduce the NY taxable estate. The catch: gifts made within three years of death are pulled back into the NY estate for tax purposes. Planning must begin early, not at the end of life.
This is the section I most want every family reading this to sit with. Because the headline — ‘$15 million exemption, great news’ — has led a lot of families to conclude that estate planning can go on the back burner. The opposite is true.
Here are the five most common ways I am seeing existing plans create problems right now — and none of them require a $15 million estate.
1. Your plan was built to beat the TCJA sunset — and it may now be structured wrong
Many families spent 2024 and 2025 rushing to implement aggressive strategies before the anticipated drop to $7 million. They funded irrevocable trusts, made large taxable gifts, and created Spousal Lifetime Access Trusts (SLATs) specifically designed to lock in the higher exemption before it disappeared.
Now the exemption is $15 million and permanent. Some of those urgently-created structures may no longer be optimal. Assets placed into irrevocable trusts cannot be taken back. If the strategy was driven primarily by the deadline rather than by long-term family goals, it deserves a second look with fresh eyes and updated law.
2. Formula clauses in older trusts may now distribute far more than you intended
Many estate planning documents — particularly those drafted before 2012 — include what attorneys call ‘formula clauses.’ These provisions automatically direct assets ‘up to the federal estate tax exemption amount’ into a bypass trust or to children, with the remainder passing to a spouse.
Here is the problem: when those documents were written, the federal exemption might have been $1 million or $3.5 million. The formula was designed to shelter that amount. Today, the same formula language now automatically directs $15 million — potentially passing far more to children or into a trust than the person ever intended, and leaving a surviving spouse with significantly less.
This issue does not announce itself. The document looks fine. It reads fine. It only becomes a problem at death — when a surviving spouse discovers the plan does not work the way they thought.
3. Your beneficiary designations have not been reviewed since the plan was created
Beneficiary designations on retirement accounts, life insurance policies, and other financial accounts control who receives those assets — and they override your will entirely. If your IRA names someone who is now divorced from your child, deceased, or estranged from the family, your will cannot fix it.
This is one of the most common — and most completely avoidable — estate planning failures I see. Beneficiary designations are living documents that need to be reviewed every three to five years and after every significant life event: marriage, divorce, birth, death, change in relationship.
4. The plan addresses estate tax but creates an income tax problem for your heirs
With the federal exemption at $15 million, a large portion of families that previously needed to plan around estate tax no longer do. But here is the shift most people are not thinking about yet: for those families, income tax has become the more pressing concern.
Retirement accounts — traditional IRAs and 401(k)s — are the most common example. Under the SECURE Act’s 10-year rule, most non-spouse beneficiaries must withdraw inherited retirement accounts within 10 years and pay income tax on every dollar. A $1 million IRA left to a child in a high-income tax bracket could result in $350,000 to $400,000 in income taxes — not estate taxes.
The estate plan that was perfectly optimized to minimize estate taxes may now be maximizing income taxes for your heirs. A current review accounts for both — and there are legitimate strategies to address the inherited IRA problem that most families simply do not know exist.
5. Life changed — and the plan did not
This one is the simplest and the most common. The will was written in 2014. The trust was created in 2019. Since then: a child got divorced. A grandchild was born. A named executor moved across the country and is now 82 years old. A business was sold. The family vacation home was purchased.
An estate plan that does not reflect your actual family — your actual wishes, your actual relationships, your actual assets — is not just outdated. It is a set of legal instructions for the wrong life.
| Is Your Estate Plan Built for 2026?John F. Davenport, Esq. — licensed estate planning attorney and financial advisor in CT and NY — reviews existing estate plans and identifies what no longer reflects current law or your family’s wishes. One appointment is usually all it takes.→ Schedule a Free Estate Plan Review → jdavenportassociates.com/contact-us |
Let me answer this directly, because I hear the question constantly.
If your total estate — home, retirement accounts, investment accounts, life insurance death benefit, business interests, personal property — is under $15 million, you almost certainly owe no federal estate tax. The federal change is genuinely good news for the vast majority of American families.
But there are three groups of people who should not read that and relax entirely.
Group 1: Families with NY real estate or NY-based assets
New York’s $7.35 million exemption and its tax cliff make this a completely different calculation for anyone with NY exposure. A $4 million Brooklyn property combined with retirement accounts and life insurance can create a seven-figure NY estate tax bill for a family that owes nothing federally. This is not a hypothetical. It is happening.
Group 2: Business owners
Business valuation is not static. A company worth $3 million today and growing at 15% per year will be worth $6 million in six years. The federal exemption may protect your estate today — it may not protect your heirs in 15 years if the business continues to appreciate. Building in strategies now to transfer ownership or future appreciation out of the taxable estate is far simpler and less expensive than doing it under pressure later.
Group 3: Anyone with large life insurance policies
Life insurance death benefits are included in your taxable estate if you own the policy at the time of death. A $2 million term policy owned by the insured, combined with a home, retirement accounts, and investments, can push a family’s estate well above where they thought they were. Most people do not account for life insurance when they mentally calculate their estate size.
An irrevocable life insurance trust (ILIT) can remove the death benefit from the taxable estate — but it must be structured properly and funded before death, not after. This is planning that needs to happen while you are healthy, not when the policy is about to pay out.
| The estate planning question that matters most in 2026 is not ‘do I owe estate tax?’It is: ‘Does my plan accurately reflect my wishes, current law, and my family’s actual situation?’ Most families — regardless of estate size — cannot answer yes to all three partsof that question without a current review. |
These are the questions I hear most often from families in Norwalk, across CT, and from clients we serve in New York or across the country.
| Q: What is the federal estate tax exemption in 2026? |
| The federal estate tax exemption is $15 million per person in 2026, or $30 million for married couples with proper planning. This is an increase from $13.99 million in 2025, and it is now permanent under the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025. Beginning in 2027, the exemption will be adjusted annually for inflation. The 40% federal estate tax rate on amounts above the exemption remains unchanged. |
| Q: Does the new $15 million exemption mean I don’t need an estate plan? |
| No. Estate planning is about far more than federal estate taxes. It determines who inherits your assets, who makes medical decisions if you cannot, who raises your children, and how retirement accounts pass to your heirs. It ensures your beneficiary designations are current. It protects your family from the cost, delay, and public exposure of probate. None of that changes with the exemption increase — and for families with New York real estate or assets, state estate tax planning remains critically important. |
| Q: Does Connecticut have its own estate tax in 2026? |
| No. Connecticut phased out its separate state estate tax in 2023. CT residents are only subject to the federal estate tax, which applies to estates above $15 million per person in 2026. Connecticut also eliminated its state gift tax, giving CT residents more flexibility for lifetime giving strategies than residents of most other states. However, if you own real property or financial assets tied to New York, New York’s separate estate tax — with a $7,350,000 exemption — may still apply to those assets. |
| Q: What is New York’s estate tax exemption in 2026 — and what is the ‘tax cliff’? |
| New York’s estate tax exemption for 2026 is $7,350,000. If your taxable estate exceeds that amount by more than 5% — above $7,717,500 — New York removes your exemption entirely, and your entire estate is subject to estate tax from the first dollar. This ‘tax cliff’ can create an effective tax rate exceeding 100% on the amount above the threshold. New York also does not allow portability of its exemption between spouses, meaning each spouse’s $7.35M exemption must be used individually through proper planning. |
| Q: I made large gifts in 2024 or 2025 to use up the higher exemption before the sunset. Am I okay? |
| Yes. The IRS confirmed that gifts made under the higher TCJA exemption will not be subject to additional estate tax — even if the exemption had dropped. Under the new law, the exemption increased further to $15 million, so those gifts are fully covered. However, you should review whether the trust structures you created are still optimal under the new rules. Some structures built specifically to beat the sunset deadline may need to be reassessed now that the urgency has passed and the rules are different. |
| Q: What is the annual gift tax exclusion in 2026? |
| The annual gift tax exclusion in 2026 is $19,000 per recipient — unchanged from 2025. You can give $19,000 to as many individuals as you like in 2026 without the gifts counting against your $15 million lifetime exemption. Married couples can combine their exclusions and give $38,000 per recipient per year. These annual exclusion gifts do not require a gift tax return and do not reduce your lifetime exemption. |
| Q: My estate plan is 5+ years old. Do I really need to update it? |
| In most cases, yes — especially now. Estate plans that predate 2022 were written under a different tax landscape. Plans from 2022 to 2025 may have been built around the anticipated TCJA sunset that never happened. Formula clauses in older documents can now trigger distributions of $15 million rather than the $1–3 million originally intended. And regardless of tax law: if your family structure, named executors, trustees, guardians, or beneficiaries have changed since your plan was created, the plan needs updating. A one-time review with a licensed estate planning attorney takes about an hour and can identify problems that would otherwise only surface at the worst possible time. |
The $15 million federal estate tax exemption is genuinely good news. For most American families — and for most families in Connecticut specifically — it means federal estate tax is no longer a practical concern.
But estate planning has never been only about federal estate tax. It has always been about making sure your assets go to the right people, in the right way, with the least possible friction, cost, and tax exposure — federal and state.
The families who are in the best position right now are not the ones with the largest estates. They are the ones with current plans — plans that reflect today’s law, today’s family, and today’s asset picture. Not the family they had in 2016. Not the tax law they were planning around in 2024. Now.
I have been a licensed estate planning attorney in Connecticut and New York for over 30 years. I do this work as both an attorney and a financial advisor — which means when I review an estate plan, I am looking at the tax picture, the retirement account strategy, the beneficiary designations, and the legal documents all at once. Most families need two separate professionals for that. Our clients do not.
If your estate plan is more than three years old, was drafted before the OBBBA, or has not been reviewed since a significant life change — it is worth an hour of your time to make sure it still does what you think it does.
| Ready to Review Your Estate Plan? A one-time review with John F. Davenport, Esq. covers your legal documents, beneficiary designations, tax exposure (federal and state), and retirement account strategy — together, not separately. It takes about an hour and costs nothing for the initial conversation.→ Schedule Your Free Estate Plan Review → jdavenportassociates.com/contact-us |
| About John F. Davenport, Esq. John F. Davenport holds a law degree from Pace University and an MBA in finance from Fordham University. He is a licensed attorney in New York and Connecticut, and holds FINRA Series 6, 7, 63, and 65 licenses. He founded Davenport & Associates in 1997 and has spent more than 30 years helping CT and NY familiesbuild retirement income plans and estate strategies that work together — not against each other. As both a licensed attorney and financial advisor, John reviews estate plans from both the legal and financial perspective in a single conversation — a combination most families would otherwise need two separate professionals to replicate. Davenport & Associates | 800 Connecticut Avenue, Suite E401, Norwalk, CT 06854 Phone: (203) 853-6300 | jdavenportassociates.com |
| References: One Big Beautiful Bill Act (OBBBA) — U.S. Congress, signed July 4, 2025 Federal Estate Tax Exemption 2026 — Pierce Atwood LLP: pierceatwood.com/alerts/one-big-beautiful-bill-act-and-estate-planning-what-you-need-know2026 Estate Tax Update — Harter Secrest & Emery LLP: hselaw.com/news-and-information/legalcurrents/outlook-the-one-big-beautiful-bill-act-permanent-estate-tax-exemptions OBBBA Estate Planning Analysis — Venable LLP: venable.com/insights/publications/2025/09/estate-planning-in-the-obbba-era-what-the-15 New York Estate Tax Exemption 2026 — NY Dept. of Taxation and Finance: tax.ny.gov/pit/estate/etidx.htm New York Estate Tax Cliff 2026 — Twomey Latham LLP: suffolklaw.com/avoiding-the-cliff-understanding-new-yorks-estate-tax NY Estate Tax 2026 Analysis — EJ Rosen Law: ejrosenlaw.com/new-york-estate-tax-exemption-2026 Annual Gift Tax Exclusion 2026 — Harter Secrest & Emery LLP (confirmed $19,000, unchanged from 2025) Federal Estate Tax Rate — 40% on amounts above exemption, unchanged under OBBBA |