A newly released proposal from the Joint Committee on Taxation outlines a significant shift in estate tax policy: a permanent unified exemption of $15 million, indexed to inflation starting in 2026. For advisors and clients alike, this development—while not yet enacted—warrants immediate attention, as it could significantly reshape estate planning strategies going forward.
Key Takeaways for Advisors
The urgency to use the current exemption may ease—but planning remains essential. Under existing law, the estate and gift tax exemption—doubled temporarily by the 2017 Tax Cuts and Jobs Act—is set to sunset at the end of 2025, reverting to an inflation-adjusted $5 million baseline. The newly proposed $15 million exemption would not only avoid that drop but more than double the post-2025 amount anticipated under current law.
Effective in 2026, indexed for inflation. According to the Joint Committee’s summary: “The proposal permanently increases the unified estate and gift tax exemption to an inflation-indexed $15 million for taxable years beginning after December 31, 2025. Accordingly, the generation-skipping transfer tax exemption is also permanently increased to an inflation-indexed $15 million.” The base year for inflation adjustments will be 2025, setting a new floor for future increases.
A shift away from repeal? With Republicans securing a 2024 electoral victory, some expected an outright repeal of the estate tax. But the proposal to lock in a higher exemption, rather than pursue repeal, may suggest a strategic pivot. For ultra-high-net-worth individuals, this signals the continued relevance of estate planning—and that relying on repeal as a planning assumption may no longer be prudent.
Implications for Client Strategy
Even if the legislation passes as proposed, it’s not a reason to delay estate planning. Instead, it underscores the importance of planning strategically, with flexibility in mind.
Estate planning is about more than taxes. The notion that estate planning serves only to transfer wealth efficiently to heirs is outdated. Well-structured plans also offer asset protection, governance, and control benefits that directly serve the grantor’s lifetime needs. In an increasingly litigious environment, planning vehicles like irrevocable trusts, LLCs, and FLPs can provide insulation from creditors and unforeseen liabilities.
Tax law volatility demands proactive planning. Advisors are acutely aware of the policy reversals that come with each new administration. A $15 million exemption today could become $3.5 million tomorrow, depending on political winds. For clients with significant assets, planning for worst-case scenarios—such as the wealth tax proposals floated by progressive lawmakers—can serve as an effective hedge.
Income tax optimization remains a key benefit of proactive estate planning. For example, advisors may guide clients to create non-grantor trusts in jurisdictions with no state income tax. These vehicles, if properly structured and administered, can generate meaningful state income tax savings, especially for clients residing in high-tax states like California, New York, or New Jersey.
Actionable Next Steps for Advisors
Continue client outreach and planning conversations. This proposal doesn’t eliminate the need for timely action—it shifts the focus. For clients who’ve been delaying decisions under the assumption the exemption would be halved, the new proposal removes some of the pressure. However, planning remains essential to lock in current opportunities and address other financial and legal priorities.
Review existing plans in light of the potential exemption increase. Clients who already implemented large lifetime gifts or trust structures in anticipation of a lower exemption may need to reassess their plans. In some cases, the new higher exemption could allow for additional transfers or refinement of existing structures without triggering transfer taxes.
Address state-level estate tax exposure. Several states, including Massachusetts and Oregon, impose estate taxes with much lower exemption thresholds than the federal level. For clients with substantial in-state real estate or business holdings, state-level planning remains a distinct and urgent priority—regardless of federal changes.
Incorporate flexibility in all planning vehicles. Use of disclaimers, spousal lifetime access trusts (SLATs), and other adaptable structures can allow clients to respond to changes in the tax code without starting from scratch. This flexibility is crucial in a landscape where tax policy remains politically sensitive and subject to reversal.
Integrate estate and income tax planning. Evaluate the use of complex trusts or other structures to minimize overall tax exposure. Clients with appreciated assets may benefit from careful planning around step-up in basis rules, grantor vs. non-grantor trust status, and charitable giving strategies—all of which remain relevant under the proposed exemption framework.
Looking Ahead
The proposed $15 million exemption—while a significant shift—does not eliminate the need for active, strategic estate planning. In fact, it opens up new opportunities for advisors to help clients build durable, flexible plans that address not only estate taxes but also income tax mitigation, asset protection, and multi-generational wealth transfer.
For RIAs and wealth managers, this moment offers a chance to deepen client relationships by focusing on planning that transcends tax code volatility. Whether or not the current proposal is enacted as written, clients will benefit from advisors who emphasize readiness over reaction.
