By Jeffrey R. Wolfe, Senior Vice President and Manager, Wealth Planning Strategies
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With our next installment for Estate Planning Awareness Week, we have a headline that has been impossible to state since 2001, “Permanent” estate tax laws. Of course, we must put “Permanent” in quotes because Congress can always change tax laws.
Before we jump to these permanent rules, perhaps a quick history. For years, the federal estate tax exclusion was $600,000, and the top rate was 55%. In 2001 came the Economic Growth and Tax Relief Reconciliation Act (“EGTRRA”). That law had many tax changes, but for estate tax laws it set into motion an oft-changing set of federal estate tax exclusions and tax rates. It started with a $1 million exclusion and 55% rate in 2001, culminating with a $3.5 million exclusion in 2009, with a 45% rate, and no estate tax in 2010 (yes, that really happened!).
During the chaotic year of 2010, along came the Tax Relief Act of 2010, which gave us a $5 million exclusion and a rate of 35%, but the law was to revert back after 2012 to the 2001 rules. Had that happened, the exclusion would have returned to $1 million, and the top rate would have returned to 55%. Many income tax laws were also going to revert, and you may remember the term “fiscal cliff” from that time.
However, the government averted the cliff by passing the American Taxpayers Relief Act of 2012[1]. This “locked in” the exclusion at $5 million, and the rate at 40%. It also introduced the idea of inflating the exclusion number annually.
Then, with the Tax Cuts and Jobs Act of 2017, the law was changed again by doubling the exclusion, making it more than $11 million at that time. Again, this law was set to revert at the end of this year, cutting the 2025 exclusion of $13.99 million roughly in half for 2026. The rate, though, would remain at 40%.
Now, with the One Big Beautiful Bill Act signed July 4, 2025, all of this chaos has been resolved with a permanent estate tax exclusion in 2026 starting at $15 million, continuing to be indexed for inflation, and with a tax rate of 40%. There is no provision about this law reverting to something else.
As I take a deep breath after reliving all of that angst during most of my career, the current law is the most stable we’ve had in a long time. Of course, this law, like any law, can be changed, but the current political environment does not seem conducive to change anytime soon.
So, what does this mean for you? Well, you can now make more firm assumptions with your estate planning. If you are comfortably lower than the current exclusion, federal tax planning may not be necessary in your plan. If you’re north of the exclusion, traditional planning like credit shelter trusts, irrevocable life insurance trusts, etc., can be considered without the fear of a law change in the near future.
For everyone, you should review your plan to make sure it will play out as you wish. For example, if you had a taxable estate plan based on a $600,000 exclusion, you may want to update that based on the new laws. If you had contingencies built into your plan to provide flexibility while the tax laws bounced around all over the place, you may want to review your documents and update your plan accordingly.
While my crystal ball has long since been broken (I would have bet everything I owned that 2010 with no estate tax would never happen, for example), we can look at where we are today and assume this may be the law of the land for a while. That said, the only thing certain in life is change, so continue to review and update your plan if or when the laws change again.
IMPORTANT DISCLOSURES: The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards & Co. is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.
[1] In spite of the Act being dated 2012, the Act was actually passed by the House and the Senate on January 1, 2013, and President Obama signed the legislation into law on January 2, 2013, or as the running joke in tax corners became, December 33, 2012.