H.R. 1, previously known as the “One Big Beautiful Bill,” was passed by both houses of Congress and was signed into law on July 4, becoming P.L. 119-21. Section 70106 of the act changes the provision that had doubled the federal estate tax exclusion amount for the years 2018 through 2025, so that there is now a permanent exclusion of $15 million in 2026 (an increase of about $1 million over the exclusion in effect in 2025), and that $15 million exclusion will be adjusted for inflation after 2025.
The estate tax exclusion amount was doubled in 2018, from $5 million to $10 million (with adjustments for inflation after 2011) under section 11061 of the reconciliation act of 2017, P. L. 115-97, but that change was temporary and would not have applied to deaths or gifts after 2025.
The temporary doubling of the exclusion amount created a tax planning problem for people who are merely wealthy, but not ultra-wealthy, because the additional exclusion amount would be lost if not used before the end of 2025. For someone with an estate of (for example) $100 million, this was not a problem because he or she could make gifts to children, grandchildren, or other family members totaling $13,990,000 in 2025 (the inflation-adjusted exclusion amount for that year) and still have more than $86 million to live on. But for someone with an estate of “only” $14 million, there was a problem. A gift of the entire exclusion amount would leave the donor relatively penniless, while gifts of less than $14 million would result in estate or gift tax of 40% on the estate in excess of the reduced exclusion amount after 2025.
The new law eliminates that dilemma. The new $15 million estate tax exclusion means that the exclusion will go up somewhat in 2026, and will not go down, so there will be no loss of the exclusion regardless of whether any gifts are made in 2025. (The new $15 million exclusion for 2026 represents an increase because an exclusion in 2026 based on an inflation-adjusted $10 million would probably have been about $14,360,000 and not $15,000,000.)
The chart of “Federal Estate and Gift Tax Rates and Exclusions” has been updated for the year 2026 to reflect this new exclusion amount.
A note about the name of the new act: H.R. 1 included a section stating that the act should be known as the “One Big Beautiful Bill Act,” but that section was deleted from the Senate version of the bill, probably because the Senate parlimentarian found that the provision violated the rules for reconciliation. (A similar change was made to the Senate version of P.L. 115-97, which was supposed to be the “Tax Cuts and Jobs Act” of 2017, but was enacted without that name.) P.L. 119-21 is therefore an act “To provide for reconciliation pursuant to title II of H. Con. Res. 14.”
Other changes made by P.L. 119-21 include the extension of many of the provisions of P.L. 115-97 that became effective in 2018, including the following that are relevant to estate and trust planning and administration:
- The income tax rate reductions made by P.L. 115-97 have been extended indefinitely.
- The increases to alternative minimum income tax exemption amounts and phase-out thresholds made by P.L. 115-97 have been extended indefinitely.
- Miscellaneous itemized deductions (other than estate and trust administration expenses described in § 67(e)) will remain entirely nondeductible.
- The provisions for ABLE account contributions and rollovers that would have expired after 2025 have been extended indefinitely.
P.L. 119-21 also includes new provisions for “Trump accounts,” which are a new kind of individual retirement account for children under 18 years of age. Those new “Trump accounts” will be addressed in a later posting.
