The Estate Plan Reset: Why the $15 Million Exemption Changes Everything (and Nothing)

You have probably seen the headlines: the federal estate and gift tax exemption is now $15 million per person. Thirty million for married couples. It is permanent, indexed to inflation, and it is not going away.

For most families, the immediate reaction is relief. Maybe even dismissal. "We're well under $15 million. Estate planning isn't something we need to worry about."

That reaction is understandable. It is also wrong.

The $15 million number is real, and it does change things. But the changes that matter most have almost nothing to do with whether you will owe estate tax. They have to do with whether your existing plan still works the way you think it does, whether decisions you made in the last two years still make sense, and whether your family is protected in ways that go far beyond tax.

What Actually Changed

On July 4, 2025, the One Big Beautiful Bill Act made the increased estate and gift tax exemption permanent. Here is the short version:

The exemption will continue to adjust for inflation starting in 2027.

For context, fewer than 0.1% of estates currently owe federal estate tax. Fewer than 1% of U.S. households have a net worth above $15 million. The federal estate tax has never been less relevant to more Americans.

So why does your estate plan still need attention? Three reasons.

If You Already Made Big Moves: Check the Foundation

For two years, estate planning attorneys and financial advisors (ourselves included) urged families to act before the exemption dropped. The reasoning was sound at the time. If the exemption fell from $14 million to $7 million, families with significant wealth would lose the ability to transfer assets tax-free.

Many families responded. They funded Spousal Lifetime Access Trusts. They created irrevocable trusts. They made large taxable gifts. They transferred business interests. These were not reckless decisions. Most of these strategies have benefits that extend well beyond tax avoidance, including asset protection, multi-generational planning, and creditor shielding.

But the premise changed. The sunset never happened. The exemption went up, not down.

If you made irrevocable moves in 2024 or 2025, three questions are worth revisiting with your attorney:

Does the strategy still serve your goals without the tax urgency? If the trust was created primarily to beat a deadline, and that deadline no longer exists, the trust may still be working for you. But it may also be creating unnecessary complexity or restricting your access to assets you do not actually need to shelter.

Are you giving up a basis step-up? Assets in certain irrevocable trusts do not receive a step-up in cost basis when the grantor dies. If your estate would not have been taxable under the $15 million exemption anyway, you may have traded a potential estate tax savings for a real capital gains tax cost when your heirs eventually sell.

Can the trust be adjusted? Some irrevocable trusts include decanting provisions, trust protector powers, or substitution powers that allow modifications. This is not the case for every trust, but it is worth reviewing.

The good news: the IRS has confirmed through final regulations that gifts made using the higher TCJA-era exemption will not be "clawed back." Your past gifts are safe. The question is whether the structures around them are still optimal.

If You Think You Are Off the Hook: Look at Your Documents

This is where the $15 million number creates a false sense of security.

Many existing estate plans contain what attorneys call "formula clauses." These are provisions that direct a specific amount, often tied to the federal exemption, into a trust or to certain beneficiaries. When these plans were drafted, the exemption might have been $5 million or $11 million. Now it is $15 million.

Here is a concrete example. A couple drafted an estate plan in 2015 that says: "Fund the credit shelter trust with an amount equal to the federal estate tax exemption." In 2015, that meant roughly $5.4 million went into the trust, and the rest went to the surviving spouse. Today, that same language directs $15 million into the trust, potentially leaving far less for the spouse than either partner intended.

Credit shelter trusts (also called bypass trusts or AB trusts) that were designed around a $5 million or $7 million exemption may now be dramatically over-funded. The result can be reduced flexibility for the surviving spouse, unnecessary administrative burden, and a distribution pattern that does not match what the family actually wants.

If your estate plan was drafted before July 2025, it needs a review. Not because you owe estate tax. Because the math your plan relies on has changed, and your documents may no longer do what you think they do.

Beyond formula clauses, the higher exemption tends to make families deprioritize estate planning entirely. But estate planning is not only about tax. For the vast majority of families, the more important questions are:

• Who makes financial and medical decisions if you are incapacitated?
• Who manages assets for your minor children, and under what terms?
• Are your beneficiary designations current across retirement accounts, insurance policies, and transfer-on-death accounts?
• Does your plan account for blended family dynamics, second marriages, or estranged relatives?
• Have you addressed probate avoidance through proper titling and trust structures?

These issues exist whether your estate is worth $500,000 or $50 million. The $15 million exemption changes none of them.

A Note on Portability

One frequently overlooked tool: the Deceased Spousal Unused Exclusion, or DSUE. When a spouse dies without using their full $15 million exemption, the surviving spouse can claim the unused portion, but only if an estate tax return (Form 706) is filed. This is not automatic.

At $15 million per person, the stakes of missing this election are enormous. If your spouse passed away recently and no Form 706 was filed, talk to your attorney or CPA. The IRS has extended filing deadlines in some cases, but the window is not open forever.

For Families with Special Needs Dependents: This Changes Your Funding Math

This is where the $15 million exemption intersects with one of the most sensitive areas of financial planning.

Families who have a child or dependent with a disability often use third-party special needs trusts to provide for that person's lifetime care without jeopardizing their eligibility for Medicaid, SSI, or other means-tested government benefits. Unlike first-party trusts, third-party special needs trusts have no Medicaid payback requirement. When the beneficiary passes away, remaining assets go to other family members or charities, not to the state.

The higher exemption creates both opportunity and risk.

The opportunity: Families can now transfer up to $15 million per person during their lifetime without triggering gift tax. This means more room to fund a third-party special needs trust while the parents are alive, allowing them to see the trust functioning and to adjust the structure if needed.

The risk: The same formula clause problem that affects other families is amplified here. If an estate plan directs "the remaining estate after the exemption amount" to a special needs trust, and the exemption is now $15 million, the trust may receive far less than intended. For a family relying on that trust to fund decades of care, this is not a rounding error. It is a potential crisis.

There is also a coordination opportunity that many families are missing. Starting in 2026, the ABLE account age-of-onset threshold expanded from 26 to 46, and annual contribution limits rose to $20,000. Special needs trust trustees can transfer funds from the trust into the beneficiary's ABLE account, giving the beneficiary more direct control over day-to-day expenses while the trust handles larger, longer-term needs. If your special needs plan was built before these changes, it likely does not account for this option.

Three Things to Do This Quarter

1. Pull out your estate planning documents and check the dates. If your plan was drafted or last updated before July 2025, schedule a review with your estate attorney. Pay particular attention to formula clauses that reference the federal exemption amount.

2. Revisit any irrevocable moves made in 2024-2025. Talk to your advisor and attorney about whether the strategies you implemented still align with your goals under the current tax landscape. You cannot undo irrevocable trusts, but you may have more flexibility than you think.

3. If you have a family member with a disability, review your entire benefit-preservation structure. The combination of the $15 million exemption, expanded ABLE eligibility, and updated trust rules means your plan should be re-evaluated as a whole, not in isolation.

Estate planning is not a set-it-and-forget-it exercise. The rules changed. Your plan should change with them. If you are not sure where to start, we can help.

This article is for educational purposes only and does not constitute legal, tax, or investment advice. The scenarios described use hypothetical examples. Consult a qualified estate planning attorney and financial advisor for guidance specific to your situation.

FamilyVest is a practice of Farther Finance Advisors, LLC, a registered investment advisor. Todd Sensing is a CFA charterholder, CFP professional, and Chartered Special Needs Consultant (ChSNC).