Estate and Gift Tax Exemption After OBBBA: A Planning Checklist for 2026 and Beyond

For years, estate planning conversations started with a deadline. The higher basic exclusion amount enacted in 2017 applied only to estates of decedents dying and gifts made before January 1, 2026, and many families rushed to make large gifts before that date. Public Law 119-21 removed the deadline. This article covers what the statute changed, the 2026 figures the IRS has published, how portability fits in, and a checklist for the client conversations that follow.

What did section 70106 change?

Section 70106 of Public Law 119-21, approved July 4, 2025, amended section 2010(c)(3) in three ways:

1. It replaced the $5,000,000 base amount in section 2010(c)(3)(A) with $15,000,000.
2. It changed the inflation adjustment in section 2010(c)(3)(B) so that it applies to decedents dying in calendar years after 2026, measured from calendar year 2025 rather than 2010.
3. It struck section 2010(c)(3)(C), the provision that substituted $10,000,000 for $5,000,000 only for estates of decedents dying and gifts made after December 31, 2017, and before January 1, 2026.

The amendments apply to estates of decedents dying and gifts made after December 31, 2025. The amended text has no expiration date of its own. The exemption can still change through later legislation, so planning documents should not assume a fixed number forever.

What are the 2026 numbers?

Revenue Procedure 2025-32, released with IR-2025-103 on October 9, 2025, sets the 2026 amounts:

The Revenue Procedure explains that the basic exclusion amount is a component of the applicable exclusion amount in section 2010(c)(2), and is used to figure both the estate tax credit and the gift tax credit under section 2505(a)(1). It also states that the basic exclusion amount will be adjusted for inflation for calendar year 2027 and later years. The IRS news release notes that the annual gift exclusion stays at $19,000, the same as 2025. The Form 706 instructions list the 2025 basic exclusion amount as $13,990,000, so a 2026 death gets roughly $1 million more of exclusion than a 2025 death.

How does portability work now?

Portability lets a surviving spouse use the deceased spousal unused exclusion (DSUE) amount of the last deceased spouse. Under section 2010(c)(4), the DSUE amount is the lesser of the basic exclusion amount or the deceased spouse's unused applicable exclusion. The Form 706 instructions describe the computation as the lesser of the basic exclusion amount in effect on the deceased spouse's date of death, or that spouse's applicable exclusion amount reduced by the amount on Part II, line 5 of the Form 706.

A few rules drive the work:

• The election requires a return. Section 2010(c)(5)(A) says the DSUE amount is available only if the executor files an estate tax return that computes it and makes the election. The election is irrevocable once made, and a return filed after the due date (including extensions) cannot make it.
• Timing. Form 706 is due 9 months after death, and Form 4768 gives an automatic 6-month extension of time to file.
• Late relief. Rev. Proc. 2022-32 lets an executor who had no filing requirement under section 6018(a) file to elect portability on or before the fifth anniversary of the decedent's death. The return must state at the top that it is "Filed Pursuant to Rev. Proc. 2022-32 to Elect Portability under section 2010(c)(5)(A)." Estates past that window may seek relief under Regulations section 301.9100-3.
• Opting out. If no return is required under section 6018(a), not filing avoids the election. An estate that files but does not want portability checks the opt-out box in Part VI, Section A.
• Last deceased spouse. The instructions define the last deceased spouse as the most recently deceased person who was married to the surviving spouse at that person's death, tested on the date of the gift or the surviving spouse's death. Remarriage alone does not change it.
• Examination. Under section 2010(c)(5)(B), the IRS can examine the predeceased spouse's return to verify the DSUE amount even after the assessment period for that return has closed, though additional tax on that return can only be assessed within the section 6501 period.

With a $15 million basic exclusion, many first-death estates have no filing requirement. That is where portability elections are most often missed, and the DSUE amount is only worth anything if someone files.

Client checklist

Use this list in year-end and planning meetings with families who may approach the exemption, either now or with growth.

1. Rebuild the balance sheet. Gather a current estimate of the gross estate, including closely held business interests, retirement accounts, life insurance owned by the client, and real estate. Value private company stock with an appraisal date the file can support. For founders, note any QSBS lots, since the section 1202 changes can affect the after-tax value of a gift of stock.
2. Total prior taxable gifts. Reconcile every gift tax return filed since the client began giving. Prior taxable gifts reduce the exclusion available at death.
3. Review formula clauses. Wills and trusts drafted around a lower or expiring exemption may use formula bequests that now push far more (or less) into a credit shelter trust than the client wants. Flag these for the client's attorney.
4. Revisit 2024 and 2025 gift strategies. Clients who made large gifts to use the exclusion before 2026 should confirm those gifts were reported correctly, and decide whether further gifting still serves non-tax goals such as asset protection or business succession.
5. Use the annual exclusion. $19,000 per donee for 2026 for present-interest gifts, and $194,000 for gifts to a non-citizen spouse. Track gifts to trusts carefully, since gifts of future interests do not qualify for the annual exclusion.
6. Allocate GST exemption deliberately. The GST exemption equals $15 million for 2026. Review automatic allocation rules and elections on gift tax returns for dynasty and grandchildren's trusts.
7. Plan the first death. Agree in advance that the executor will file Form 706 to elect portability even when no tax is due, and calendar the 9 month due date and the five-year Rev. Proc. 2022-32 outer date.
8. Check state exposure. Several states impose their own estate or inheritance tax with exemptions far below the federal amount. A client with no federal exposure can still owe state tax.
9. Coordinate income tax basis. Assets held until death generally receive a basis adjustment, while gifted assets carry over the donor's basis. With a higher exemption, holding low-basis assets until death may produce a better combined result than gifting them.
10. Document the advice. Record the figures used, the assumptions and the client's decisions in the file. If the law changes, the memo shows what the advice was based on.

Where this fits with other 2025 changes

The estate and gift changes sit beside the business provisions that affect the same families. Pass-through owners should review the QBI deduction changes, and the 2026 client meeting checklist covers the business side of the same conversation.

Common errors

• Assuming a small first-death estate needs no Form 706, and losing the DSUE amount.
• Using a 2025 exclusion figure for a 2026 death.
• Leaving old formula clauses in place without modeling the new exemption.
• Counting gifts of future interests against the annual exclusion.

CORAA prepares ready-to-review audit files for US CPA firms; see /us.

Sources

• U.S. Government Publishing Office, Public Law 119-21, section 70106: https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm
• U.S. Government Publishing Office, 26 U.S.C. 2010 (2022 edition, pre-amendment text): https://www.govinfo.gov/content/pkg/USCODE-2022-title26/html/USCODE-2022-title26-subtitleB-chap11-subchapA-partII-sec2010.htm
• Internal Revenue Service, Revenue Procedure 2025-32: https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
• Internal Revenue Service, IRS releases tax inflation adjustments for tax year 2026 (IR-2025-103): https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
• Internal Revenue Service, Instructions for Form 706: https://www.irs.gov/instructions/i706

AU-C references are to AICPA Professional Standards, paraphrased here; read the standard itself before relying on a requirement. This page is guidance, not professional advice. Report an error