Estate tax exemption
Also: estate tax exemption, lifetime exemption, applicable exclusion, unified credit
The amount an individual can transfer during life or at death without triggering federal estate or gift tax. The 2026 exemption is $13.99 million per individual ($27.98 million per married couple), scheduled to sunset to approximately $7 million in 2026 absent legislation.
The federal estate tax exemption is the unified amount an individual can transfer free of federal estate and gift tax, combining the lifetime gift exemption and the at-death estate exemption. For 2025 the exemption is $13.99 million per individual. Under the Tax Cuts and Jobs Act sunset provision, the exemption was scheduled to revert to roughly $7 million per individual in 2026 absent new legislation; the current law in force at each moment of gift or death controls. Amounts above the exemption are taxed at a flat 40% federal rate. Several states impose additional estate taxes with lower exemptions (Oregon at $1 million, Massachusetts at $2 million, New York at $7.16 million).
Example: a tech founder with a $35 million estate plans to gift $14 million into an IDGT in 2025, using the full exemption before any sunset. If the exemption reverts to $7 million in 2026, the earlier gift is not clawed back under current anti-clawback regulations.
Common mistake: waiting to use exemption until late in life, risking legislative change that lowers the amount available.
The exemption matters at wealth transfer timing, at trust funding decisions, and at coordination with state-level exemptions.