Originally Published December 23, 2024 | Updated January 2026
You've spent decades building wealth, protecting your family, and creating something meaningful. But without proper estate planning, that legacy could be diminished by taxes, tied up in probate, or distributed in ways that don't align with your values.
The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, dramatically changed the estate planning landscape starting January 1, 2026. The federal estate tax exemption jumped to $15 million per person ($30 million for married couples), permanently avoiding the sunset that would have cut exemptions in half.
While this is good news for many families, estate planning remains essential. Tax law can change, many states have their own estate taxes with much lower exemptions, and proper planning protects far more than just tax exposure. It ensures your assets go where you want them, your healthcare wishes are respected, and your family isn't left with confusion or conflict during an already difficult time.
This guide explains what the 2026 changes mean for you, why estate planning matters regardless of your net worth, and what specific steps you should take to protect your legacy.
What Changed in 2026: Understanding the New Estate Tax Rules
The OBBBA brought certainty to an area that had been in flux since the Tax Cuts and Jobs Act (TCJA) of 2017. Here's what you need to know:
Federal Estate Tax Exemption:
- 2025: $13.99 million per person ($27.98 million for married couples)
- 2026 and beyond: $15 million per person ($30 million for married couples)
- Starting 2027: Annual inflation adjustments
Annual Gift Tax Exclusion:
Remains $19,000 per recipient for 2026 ($38,000 for married couples combining exclusions)
You can gift this amount to unlimited recipients annually without using any of your lifetime exemption
Portability:
- Surviving spouses can inherit unused exemption amounts from deceased spouses
- Requires filing Form 706 (estate tax return) within specified timeframes, even if no tax is owed
Estate Tax Rate:
- Remains at 40% for amounts exceeding the exemption
What This Means:
The panic around the TCJA sunset has passed. The exemption won't drop to roughly $7 million as feared. However, Congress can always change tax law, and many states impose their own estate taxes with much lower thresholds. Planning remains critical.
Why Estate Planning Still Matters (Even with Higher Exemptions)
Many people assume estate planning is only about taxes. While tax efficiency is important, comprehensive estate planning addresses far more:
1. Asset Protection and Control
Without a proper estate plan, state intestacy laws determine who inherits your assets. This may not align with your wishes. Even if you have a will, assets can be tied up in probate for months or years, costing your heirs time, money, and privacy.
Trusts, beneficiary designations, and proper titling can help assets pass directly to heirs outside of probate, maintaining privacy and reducing costs.
2. State Estate Taxes Can Still Apply
While federal exemptions are generous, many states impose their own estate or inheritance taxes with much lower thresholds:
- Massachusetts: $2 million exemption
- New York: $7.35 million exemption (2026), with cliff provision that taxes entire estate if it exceeds 105% of exemption
- Oregon: $1 million exemption
- 12 states plus D.C. impose state estate or inheritance taxes
If you own property in multiple states or have relocated in retirement, you may face state-level estate taxes even if your federal exposure is zero.
3. Healthcare Decisions and Incapacity Planning
Estate planning isn't just about death. It's equally important during life. Healthcare directives (living wills, healthcare powers of attorney) ensure your medical wishes are followed if you become incapacitated. Financial powers of attorney allow someone you trust to manage your affairs if you can't.
Without these documents, your family may need to go to court to obtain guardianship, a costly and emotionally draining process.
4. Guardianship for Minor Children
If you have minor children, your will should designate guardians. Without this designation, the court decides who raises your children, a decision that may not align with your preferences.
5. Providing for Loved Ones with Special Needs
If you have a family member with disabilities who receives government benefits (SSI, Medicaid), leaving them assets directly can disqualify them from those benefits. Special needs trusts preserve eligibility while providing supplemental support.
At MJT & Associates, we specialize in special needs planning and help families navigate this complex area with compassion and expertise.
6. Business Succession and Continuity
If you own a business, estate planning determines what happens to it after you're gone. Will it continue operating? Who takes over? How is it valued and transferred?
Without proper planning, family disputes can arise, operational continuity suffers, and the business value may be significantly diminished. For more on this topic, see our article on business exit planning for entrepreneurs.
7. Minimizing Family Conflict
Clear, well-documented estate plans reduce the likelihood of family disputes. When your intentions are explicit, there's less room for misunderstanding or conflict among heirs.
The Seven Essential Estate Planning Documents
A comprehensive estate plan typically includes the following core documents:
1. Last Will and Testament
Purpose:
Specifies how your assets are distributed after death, names guardians for minor children, and designates an executor to manage your estate.
Limitation:
Assets with beneficiary designations (retirement accounts, life insurance) and assets held in trust pass outside the will. Only assets titled in your name alone typically pass through the will and probate.
2. Revocable Living Trust
Purpose:
Holds and manages assets during your life and distributes them after death, avoiding probate. You maintain full control during your lifetime and can modify or revoke the trust at any time.
Benefits:
- Avoids probate (faster distribution, lower costs, privacy)
- Provides continuity if you become incapacitated
- Allows detailed distribution instructions (age restrictions, milestone distributions, etc.)
3. Durable Power of Attorney for Finances
Purpose:
Authorizes someone to manage your financial affairs if you become incapacitated. This includes paying bills, managing investments, filing taxes, and handling real estate transactions.
Critical Note: Without this document, your family would need to petition the court for guardianship, a time-consuming and expensive process.
4. Healthcare Power of Attorney (Healthcare Proxy)
Purpose:
Designates someone to make medical decisions on your behalf if you're unable to do so. This person (your healthcare agent) can consult with doctors, authorize treatments, and make end-of-life decisions based on your wishes.
5. Living Will (Advance Healthcare Directive)
Purpose:
Documents your preferences for end-of-life care (life support, resuscitation, feeding tubes, etc.). This guides your healthcare agent and medical providers.
6. Beneficiary Designations
Purpose:
Retirement accounts (401(k), IRA), life insurance policies, and certain bank accounts allow you to name beneficiaries who receive assets directly upon your death, bypassing probate.
Critical Mistake:
Failing to update beneficiary designations after life changes (marriage, divorce, births, deaths) can result in assets going to unintended recipients. Beneficiary designations override your will.
7. HIPAA Authorization
Purpose:
Allows designated individuals to access your medical information. Without this authorization, healthcare providers cannot share details with your family due to privacy laws.
Advanced Estate Planning Strategies
Beyond the essential documents, several advanced strategies can further optimize your estate plan:
Irrevocable Life Insurance Trusts (ILITs)
Life insurance proceeds are generally income tax-free, but they're included in your taxable estate for estate tax purposes. An ILIT removes life insurance from your estate while providing liquidity to pay estate taxes or support heirs.
Charitable Remainder Trusts (CRTs)
You transfer assets to a trust that pays you (or designated beneficiaries) income for a term of years or life. After the term, remaining assets go to charity. This provides an immediate charitable deduction, removes assets from your estate, and generates income.
Strategic Lifetime Gifting
While the annual gift exclusion ($19,000 per recipient in 2026) doesn't reduce your lifetime exemption, larger gifts do. However, gifting appreciating assets now can remove future appreciation from your estate.
529 Superfunding:
You can contribute five years' worth of annual exclusions at once to a 529 education savings plan ($95,000 per beneficiary, or $190,000 for married couples in 2026) without using your lifetime exemption.
Grantor Retained Annuity Trusts (GRATs)
You transfer appreciating assets to a trust and receive annuity payments for a term of years. At the end of the term, remaining appreciation passes to beneficiaries with minimal gift tax consequences. GRATs work well with assets expected to appreciate significantly (business interests, concentrated stock positions).
Qualified Personal Residence Trusts (QPRTs)
You transfer your primary or vacation home to a trust while retaining the right to live there for a specified term. After the term, the home passes to beneficiaries at a reduced gift tax value. This removes a valuable asset from your estate at a discount.
Estate Planning After Divorce: Critical Updates
Divorce profoundly impacts your estate plan. Immediate action is essential:
- Update your will: Remove your ex-spouse as beneficiary and executor
- Revise powers of attorney: Your ex-spouse should no longer make financial or healthcare decisions
- Change beneficiary designations: Update retirement accounts, life insurance policies, bank accounts
- Review trust provisions: Trusts may contain provisions favoring your ex-spouse
- Consider children: If minor children are involved, coordinate guardianship provisions and ensure trusts protect their interests
Some states have "revocation-upon-divorce" statutes that automatically revoke ex-spouses as beneficiaries, but not all do. Don't rely on these statutes. Proactively update everything.
For comprehensive guidance, see our article on divorce planning for high-net-worth individuals.
When to Review and Update Your Estate Plan
Estate planning is not a one-time event. You should review your plan:
- Every 3-5 years: Even if nothing changes, laws and regulations evolve
- After major life events:
- Marriage or divorce
- Birth or adoption of children or grandchildren
- Death of a beneficiary or executor
- Significant change in net worth
- Starting, selling, or closing a business
- Retirement
- Relocation to another state
- Diagnosis of serious illness
- Change in relationship with named beneficiaries or executors
After tax law changes: The 2026 OBBBA changes are a perfect example. Review your plan to ensure it aligns with new exemption levels and opportunities.
Common Estate Planning Mistakes to Avoid
- Procrastination: Assuming you have time. Accidents and illnesses happen without warning
- DIY estate planning: Online templates may not comply with state law or address your specific needs
- Forgetting to fund trusts: Creating a trust but not transferring assets into it renders it useless
- Outdated beneficiary designations: Ex-spouses or deceased individuals still listed
- No incapacity planning: Focusing only on death, not disability
- Not coordinating with other advisors: Estate plans should align with financial plans, tax strategies, and business structures
- Failing to communicate: Not telling family members where documents are or what your wishes are
Special Situations Requiring Custom Planning
Blended Families
If you have children from a previous marriage, balancing the needs of your current spouse and children from prior relationships requires careful planning. Trusts can provide for a surviving spouse during their lifetime while ensuring assets ultimately pass to your children.
Business Owners
Business succession planning is critical. Buy-sell agreements, valuation methods, key person insurance, and transition timelines must be addressed. Your estate plan should coordinate with your business exit strategy.
High-Net-Worth Individuals
Even with the $15 million exemption, estates above this threshold face 40% federal estate tax. Advanced strategies (GRATs, ILITs, charitable trusts, family limited partnerships) can reduce exposure while preserving wealth for heirs.
Digital Assets
Your estate plan should address digital assets: cryptocurrency, online accounts, social media profiles, digital photos, and cloud storage. Designate someone to manage these assets and provide access instructions.
Working with Estate Planning Professionals
Estate planning requires a coordinated team approach:
- Estate planning attorney: Drafts legal documents, ensures compliance with state law, provides legal guidance
- Financial advisor (CFP®): Integrates estate planning with retirement planning, tax strategy, and investment management
- CPA/tax professional: Advises on tax consequences, prepares estate tax returns if required
- Insurance specialist: Structures life insurance policies, disability coverage, long-term care insurance
At MJT & Associates, we coordinate with your legal and tax advisors to ensure your estate plan aligns with your broader financial goals. We help business owners plan exits, families protect special needs loved ones, and individuals navigating divorce restructure their estates.
Frequently Asked Questions
Q: Do I need estate planning if my estate is under $15 million?
A: Absolutely. Estate planning is about far more than taxes. It ensures your assets go where you want them, avoids probate, protects your family if you become incapacitated, and minimizes conflict. State estate taxes, special needs planning, business succession, and divorce considerations all require planning regardless of net worth.
Q: What happens if I die without a will or estate plan?
A: Your assets will be distributed according to your state's intestacy laws, which may not reflect your wishes. The court will appoint an administrator (often a lengthy and expensive process), and if you have minor children, the court will decide guardianship. Probate becomes more complicated and costly without proper planning.
Q: Can I name a trust as beneficiary of my retirement accounts?
A: Yes, but it requires careful planning. Naming a trust as beneficiary can provide control over distributions and asset protection, but it may affect required minimum distributions and tax treatment. Consult with your financial advisor and attorney to ensure the trust is properly structured.
Q: How does the portability election work for married couples?
A: When the first spouse dies, the surviving spouse can inherit any unused portion of the deceased spouse's federal estate tax exemption by filing Form 706 within the required timeframe (typically within five years of death for late elections). This effectively doubles the exemption for the surviving spouse. However, this election must be made proactively; it doesn't happen automatically.
Q: Should I update my estate plan after the 2026 OBBBA changes?
A: Yes. While the higher exemption reduces federal estate tax exposure for many families, your plan may contain provisions based on lower exemption levels or strategies that are no longer necessary. Review with your advisor to ensure your plan reflects current law and your current intentions.
Conclusion: Protecting Your Legacy Starts Now
Estate planning is not a luxury reserved for the wealthy. It's a fundamental responsibility for anyone who cares about their family's future. The 2026 changes provide relief for many families, but they don't eliminate the need for thoughtful, comprehensive planning.
Your estate plan is your voice when you can no longer speak. It protects your assets, guides your family through difficult times, ensures your healthcare wishes are respected, and preserves the legacy you've worked so hard to build.
Whether you're a business owner planning your exit, a parent protecting minor children, someone navigating divorce, or an individual with a loved one who has special needs, estate planning provides clarity, control, and peace of mind.
At MJT & Associates, we help clients create comprehensive estate plans that integrate with their broader financial goals. We work alongside your attorney and tax professionals to ensure nothing falls through the cracks.
Don't wait. Start protecting your legacy today. Contact us to schedule a consultation.
___
About the Author: Mitchell J. Thompson holds the CFP®, CDFA®, ChSNC®, and AEP® designations and specializes in holistic financial planning for entrepreneurs, families, and individuals navigating life transitions. MJT & Associates provides comprehensive estate planning guidance integrated with retirement planning, tax strategy, and wealth management.
Disclosure: This article is for informational purposes only and does not constitute legal, tax, or financial advice. Estate planning laws vary by state and change frequently. The One Big Beautiful Bill Act provisions discussed are based on legislation enacted as of July 2025. Consult with qualified estate planning attorneys, tax professionals, and financial advisors before implementing any strategies.
