For a decade, estate planning conversations ended with "…but the exemption sunsets in 2026." That cliff is gone. The One Big Beautiful Bill Act set the federal estate and gift exemption at $15 million per person — $30 million per married couple — indexed for inflation, with no scheduled expiration.
So planning is over? The opposite. The federal cliff was replaced by problems that are easier to ignore and just as expensive.
Problem one: New York's cliff never went away
New York's estate tax exemption is around $7.2 million — less than half the federal number — and it isn't a normal exemption, it's a cliff: exceed it by more than 5% and you lose the entire exemption, with tax computed from dollar one at rates up to 16%. A $7.6 million New York estate can owe roughly $700,000 that a $7.1 million estate wouldn't. New York also has no gift tax — but adds back gifts made within three years of death.
New Jersey repealed its estate tax, but kept an inheritance tax of up to 16% on transfers to siblings, nieces and nephews, friends, and partners you aren't married to. Spouses, children, and grandchildren are exempt — but plenty of real-world wills leave something to a Class C or D beneficiary and generate a surprise bill.
Problem two: the estate tax isn't the tax most families will pay
With a $30 million couple exemption, the binding tax for most affluent families is now the capital gains tax on inherited assets — and the planning runs backwards from the old instincts. Assets you hold until death get a step-up in basis: decades of appreciation vanish for income tax purposes. Assets you gave away during life carry your old basis to the recipient, along with your gain.
- Old reflex: give appreciated assets away early to escape the estate tax.
- New math: under the exemption, holding appreciated assets until death is often the better tax outcome — while gifting works best with cash or high-basis assets, or where you're managing the New York cliff.
The trap to check this year: old trust documents written to "use the full federal exemption" by formula. With a $15M exemption, a formula clause can accidentally disinherit a spouse or overfund a trust nobody wanted funded. Documents written before 2026 deserve a re-read.
The tools still worth using
- Annual exclusion gifts — roughly $19,000 per recipient per year, unlimited recipients, no paperwork against the exemption. Still the cheapest wealth transfer there is.
- QSBS just got supercharged: the exclusion for qualified small business stock rose to $15 million per issuer, with partial benefits now starting at a 3-year hold. Founders and early employees of C corporations — and business owners considering a C corp structure for a future exit — should know their eligibility cold.
- Life insurance trusts, SLATs, and GRATs still solve liquidity, the NY cliff, and control problems — the use cases narrowed, they didn't disappear.
- Portability requires action: a deceased spouse's unused exemption transfers only if an estate tax return is filed on time — even when no tax is due. Skipping this filing is the most common unforced error in estates below the exemption.
What to actually do in 2026
Inventory assets by basis, not just value. Re-read every formula clause. Map beneficiaries against New Jersey's inheritance classes. Model the New York cliff if you're within shouting distance of $7 million. Then decide what to give, what to hold, and what to insure — in that order.
This article is general information based on rules in effect for 2026, not advice for your specific situation. Thresholds and rules change, and details matter — talk to us (or your own advisor) before acting on anything here.