The clock is ticking on one of the most generous estate-planning opportunities in U.S. history. Under current legislation, individuals can currently transfer up to $13.99 million, or $27.98 million per married couple free of federal estate and gift tax. But unless Congress acts, that lifetime exemption is set to drop by roughly half on January 1, 2026. This sunset provision has already been confirmed in final regulations from the IRS.
"Think of it as a ‘use‑it‑or‑lose‑it' window," says Judson Gee, CEP®, Managing Partner of JHG Financial in Charlotte. "Families who wait until 2026 could voluntarily add millions to their future tax bill."
Why Is the Exemption Shrinking?
The TCJA temporarily doubled the estate and gift tax exemption starting in 2018, but only through 2025. Under current law, the exemption will revert to pre-2018 levels, which is around $5 million per person, indexed for inflation, beginning in 2026.
A Congressional Research Service tracker lists the estate-tax rollback among dozens of provisions expiring that year. Importantly, the IRS has made clear that gifts made under the current higher exemption will not be subject to a future "claw back." That ruling strongly encourages affluent families to act now, while the window remains open.
What's at Stake
At today's 40% top estate-tax rate, a drop from $13.99 million to roughly $7 million per person could expose more than $2.7 million to federal tax – potentially costing over $1 million per unplanned estate. And in high-tax states with their own estate or inheritance levies, the cost could be even greater.
How to Prepare Before the Sunset
Gee says this looming change has moved estate planning to the top of the priority list for many families. One key strategy: accelerating lifetime gifts. Those holding private business shares, investment real estate, or highly appreciated stock should consider transferring those assets now, and use vehicles like Spousal Lifetime Access Trusts (SLATs) or multigenerational dynasty trusts, while the current exemption still applies.
"Gifting future growth out of the estate is the single most powerful lever most families can pull," Gee says, emphasizing that these transfers will not be reversed under the new rules.
Business owners should also act quickly to secure a fair, supportable valuation while discounts for lack of marketability or minority interest are still in play. Locking in a lower valuation today means more of the exemption can be preserved for the same stake.
"A carefully documented appraisal now can translate into a lower estate tax later," Gee adds.
Finally, he urges families to revisit their core estate documents – including wills, powers of attorney, beneficiary designations, and older irrevocable trusts — many of which were built around outdated rules. Coordinating with state-specific estate tax thresholds and reviewing how assets are titled can help avoid costly surprises after 2026. "Paperwork that looked perfect five years ago could leave a seven-figure hole after 2026," Gee cautions.
JHG Financial operates as an Independent Advisor through Kingswood Capital Partners, custody through Raymond James Financial, acting as a Fiduciary. Judson is a Certified Estate Planner™ (CEP®). He is also a Registered Investment Adviser Representative (Series 65 license), and Registered Securities Principal (Series 24 license) and Registered Securities Representative (Series 7 and 63 licenses).
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