This report, distributed by Estate Planning Attorney Douglas Kuthy, examines a permanent increase to the federal estate and gift tax exemption that took effect January 1, 2026.
The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently set the federal estate, gift, and generation-skipping transfer tax exemption at $15 million per individual, or $30 million for a married couple using portability, effective for deaths and gifts occurring on or after January 1, 2026. The exemption is indexed for inflation beginning in 2027.
The new exemption represents an increase from the $13.99 million per individual exemption that applied in 2025. Before the Act was signed, the higher exemption amounts established under the 2017 Tax Cuts and Jobs Act had been scheduled to expire at the end of 2025 and revert to roughly half their 2025 level, adjusted for inflation. The Act eliminated that scheduled reduction and made the increased exemption permanent, without a further expiration date written into the law.
The top federal estate tax rate remains 40 percent, applied only to the portion of an estate's value that exceeds the applicable exemption amount. According to Internal Revenue Service data, fewer than 0.2 percent of estates owe any federal estate tax under current exemption levels.
The annual gift tax exclusion, a separate allowance that lets an individual give up to a certain amount to any number of recipients each year without using any of their lifetime exemption or filing a gift tax return, is $19,000 per recipient for 2026.
Michigan does not impose its own state-level estate tax or inheritance tax. The state's inheritance tax was repealed for individuals who died after September 30, 1993, meaning Michigan residents generally only need to plan around the federal estate tax rather than a separate state-level tax.
Portability, which allows a surviving spouse to use any portion of a deceased spouse's unused exemption in addition to their own, is not automatic. To elect portability, the deceased spouse's estate must file a federal estate tax return, IRS Form 706, within nine months of the date of death, or within 15 months if an extension is requested, even if the estate owes no federal estate tax and would not otherwise be required to file a return.
Roughly a dozen states and the District of Columbia continue to impose their own separate estate or inheritance taxes, several with exemption thresholds set far below the federal $15 million level, in some cases as low as $1 million. Because Michigan is not among those states, Michigan residents whose estates fall under the federal threshold generally face no state-level estate or inheritance tax exposure at all, though this can change for residents who own real property in a state that does impose such a tax.
While the increased exemption means significantly fewer families face a federal estate tax liability, estate planning documents such as wills, trusts, and powers of attorney continue to serve purposes beyond tax minimization, including directing how assets are distributed, naming guardians for minor children, and designating decision-makers in the event of incapacity.
The tax information referenced in this release is based on the text of the One Big Beautiful Bill Act and published Internal Revenue Service guidance. The information is presented for general public awareness and is not a substitute for individualized legal or tax advice.
Estate Planning Attorney Douglas Kuthy provides estate planning services to families throughout West Bloomfield and Oakland County, Michigan.
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Estate Planning Attorney Douglas Kuthy
Douglas Kuthy
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