Preparing for the 2026 Estate Tax Exemption Reduction
As we approach to the end of 2025, a major shift in federal estate tax law is on the horizon, one that could significantly impact families, business owners, and individuals with substantial assets. At Jimenez-Diaz Law, we believe in proactive planning, and understanding this upcoming change is critical for anyone looking to preserve wealth and protect their legacy.
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What Is the Estate Tax Exemption?
The federal estate tax is a tax imposed on the transfer of property after someone passes away. However, there’s a threshold, known as the estate tax exemption, below which your estate isn’t subject to federal taxation.
In 2025, this exemption stands at $13.99 million per individual, or nearly $28 million for married couples. That means if the total value of your estate is below this amount, your heirs will not pay federal estate tax.
But here’s the key:
This high exemption amount is temporary. Unless Congress extends the current provisions, it will automatically revert on January 1, 2026, to an estimated $7 million per individual. This change, often referred to as the “sunset” of the Tax Cuts and Jobs Act (TCJA), could expose a much larger number of families to estate taxes they may not have previously considered.
Why This Matters — Even If You Don’t Feel “Ultra Wealthy”
It’s easy to assume that estate taxes only affect the ultra-rich. But when you account for real estate, retirement accounts, business interests, life insurance policies, investment portfolios, and personal property, many Americans, especially business owners and professionals—may find their estates nearing or exceeding the reduced exemption.
For example:
• A family owns a business valued at $4 million
• They own two properties totaling $3 million
• They have $1 million in investments and savings
That’s $8 million in total assets — meaning that in 2026, $1 million could be taxed at up to 40%, unless proper planning is done now.
What Can You Do to Prepare?
At Jimenez-Diaz Law, we work closely with our clients to assess their current estate plans and explore strategies that align with their goals. If your estate may exceed the future exemption, there are several planning options you may want to consider:
1. Lifetime Gifting
Take advantage of the current high exemption by gifting assets to loved ones before 2026. This removes those assets from your taxable estate.
2. Use of Trusts
Establish irrevocable trusts—such as Spousal Lifetime Access Trusts (SLATs) or Grantor Retained Annuity Trusts (GRATs)—to shift appreciating assets out of your estate while retaining some control or benefit.
3. Business Succession Planning
If you’re a business owner, this is a good time to begin planning for ownership transition. Transferring business interests before the exemption drops can minimize future tax liability and legal complications for your heirs.
4. Review Beneficiaries and Asset Structures
Ensure that your current estate plan reflects your wishes and takes full advantage of legal tools that reduce tax exposure.
Why Act Now?
Estate planning is not just about preparing for the unexpected, it’s about taking control of your financial legacy and avoiding unnecessary losses. Acting now gives you the flexibility to structure your estate in a tax-efficient way, using the legal tools that are most advantageous under current law.
If you wait until 2026, the opportunity to use the higher exemption amount will be gone, and your family could face substantial tax obligations.
How Jimenez-Diaz Law Can Help
Our firm is uniquely positioned to guide clients through these upcoming changes. We take a personalized, strategic approach, ensuring that every estate plan reflects your values, protects your wealth, and prepares your family for the future.
If you’re unsure whether the 2026 estate tax exemption reduction will affect you, we’re here to help you evaluate your options and create a plan that works.
Schedule a consultation today to secure your legacy while the current law is still in effect.
This post is for general informational purposes only and does not constitute legal advice. For legal guidance tailored to your situation, please contact Jimenez-Diaz Law directly.
“Based on current federal tax policy and projections published by the IRS and estate law analysts as of early 2025.”