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2026 Estate-Tax Sunset on the Horizon

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In a little more than two-and-a-half years, it will be 2026. That’s when the historically high estate tax exemptions are scheduled to sunset to $5 million, the 2017 level, adjusted for inflation. Most think that number will be around $7 million.

2026: A Crystal Ball Would Be Nice

Obviously, Congress and the president can change that—increase the exemption, lower the exemption, or eliminate the “death tax” entirely. No one really knows what’s ahead. But clients with estates in the $7 million range are starting to ponder whether they should start taking steps to avoid the tax.

One idea: Give it away. Sounds easy. But there are rules.

The exemption for 2023 is $12.92 million per person. That’s for both gift and estate tax—the tax schemes are “unified.” So, if you die in 2023, that’s the amount you could give away at your death AND during lifetime. The exemption you get is the one that is in effect in the year of death. But during this period of high exemptions, you can give away more than the future reduced amount and  those gifts won’t be subject to the future lower limit. But not-as-large gifts – those under that future amount – don’t get special treatment.

For Example:

Let’s say Pat has an estate valued at $10 million and gives $3 million in lifetime gifts to reduce the estate to $7 million. If Pat dies in 2026 and the adjusted exemption is indeed $7 million, Pat’s remaining exclusion would be $4 million. The gift made in 2023 did not end up exceeding the future reduction, Pat gets no extra to give away.

BUT if the amount Pat gave away exceeded the future lower limit, the excess gift would escape tax. Say Pat instead made gifts of $9 million prior to 2026 and the at death the exemption was $7 million. Then Pat’s extra $2 million in gifting is not taxed. But Pat does not get additional exemption, unless Pat lives long enough that the annual inflation adjustments kick the exemption up over the $9 million already gifted.

What to Do Before 2026?

So, what can you do if you have more than $7 million and don’t want to give it all away? Lots of things, and here are a few that are really easy.

1) Spend some money. Consider treating yourself. Then, think about others, but be careful. You can’t just just toss money at friends and family without estate/gift tax consequences. Only certain spending on other people doesn’t count. You can pay education and medical expenses, but you need to pay directly to the institution or medical facility. To pay for education indirectly, you can contribute to educational 529 plans, subject to annual exclusion limits (see below).

2) Give to charity. No gifts to qualified charities are taxed. They’re donations.

3) Get married. Spouses can receive unlimited gifts so long as both are U.S. citizens. Plus, with some planning, married couples get to double the exemption. For 2023, this would mean that a married couple has a combined exemption of $25.84 million. In 2026, that’s probably $14 million.

A Commonly Misunderstood Option

4) Take advantage of the annual exclusion. The IRS lets us all give a certain amount each year. It’s called the gift tax exclusion. If you exceed the exclusion limit per person, you start to chip away at your exemption. (And you are supposed to file a gift tax return-Form 709–to inform the IRS.) The 2023 gift tax freebie limit is $17,000. You can give $17,000 to as many people as you wish and owe no tax and preserve all of your entire estate exemption. And spouses each get $17,000, giving a married couples $34,000 per person to give away.

Remember, though, that all gifts count, including ones that are not cash. Did you give your son your old car? If its value exceeds $17,000 (or $34,000 if you are married), you’ve used up a little bit of your estate tax exemption and should report it. Plus, a special rule for 529s allows you to contribute five years of gifts at once.

Easy Is Not Always Best

There are of course more elaborate planning techniques. Certain types of trusts and entities can reduce the value of your estate for estate tax purposes plus provide income tax benefits and help preserve your estate for future generations. (Rather than risking recipients using it unwisely.)

Even simple gifting should be undertaken with caution. Gifts can have an impact on income tax—both good and bad. It’s a good idea to get a full analysis of your entire tax picture. And really if your estate might be subject to estate tax, you can afford to assistance from financial, tax, and estate planning professionals to explain various strategies and weigh your options. Just keep in mind: Proper planning takes time. And 2026 is not that far away.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.