Making the Most of 2026 Gift & Estate Tax Updates

What’s Changed for 2026: Why It Matters for Gifting & Estate Planning

Several updates to federal gift and estate tax rules may influence how families approach wealth transfer and long-term planning. While these changes do not require immediate action for everyone, they affect the timing, structure, and flexibility of gifting strategies—particularly for those planning proactively, supporting younger generations, or managing future estate tax exposure. Understanding how the updated annual gift exclusion, lifetime exclusion, and new savings options work together can help inform thoughtful planning decisions in the year ahead.

The Annual Gift Exclusion for 2026

For 2026, the annual gift tax exclusion is $19,000 per recipient. This allows an individual to gift up to $19,000 to any one person during the year without incurring gift tax or using any portion of their lifetime exclusion. Married couples may elect to split gifts, effectively doubling the amount to $38,000 per recipient in 2026.

The annual exclusion enables families to transfer assets gradually over time without triggering gift tax, which can help preserve lifetime exemption amounts for larger transfers in the future.

Key considerations include:

• The exclusion applies separately to each recipient
• Gift-splitting is available only to married couples
• Gifts within the annual exclusion do not reduce lifetime exemption amounts

In addition, direct payments made on behalf of someone else for qualified tuition or medical expenses remain fully excluded from gift tax. These payments do not count against either the annual or lifetime exclusion. This provision allows families to cover significant education or medical costs while preserving their gifting capacity for other planning objectives.

The Lifetime Gift and Estate Tax Exclusion

Legislation passed in 2025 increased the lifetime gift and estate tax exclusion—the total amount an individual can transfer during their lifetime or at death without incurring federal estate or gift tax - from $13.99 million to $15 million per individual. Under current law, this increase is permanent.

The higher exclusion provides additional flexibility in estate planning by allowing larger transfers without immediate tax consequences. For individuals with more complex estates, it may expand the range of strategies available to address long-term goals, anticipated estate tax exposure, and intergenerational planning considerations.

Trump Accounts: A New Savings Option for Children

Trump accounts are a newly created type of tax-advantaged savings account designed for children. While they share some similarities with traditional IRAs, they operate under distinct eligibility, contribution, and distribution rules.

Trump accounts are available for children who:

• Are born after December 31, 2024, and before January 1, 2029
• Are U.S. citizens

As part of a pilot program, the U.S. Treasury will make an initial $1,000 contribution to eligible accounts.

Additional features include:

• Contributions are not tax-deductible
• The annual contribution limit is $5,000 per calendar year, indexed for inflation after 2027
• Employers may contribute up to $2,500 annually on behalf of employees or their dependents, and these contributions are excluded from income
• All contributions made before age 18 must be invested in low-cost index funds
• No distributions are permitted before the beneficiary reaches age 18

After the beneficiary turns 18, the account generally follows traditional IRA rules. Distributions may be subject to income tax depending on the source of contributions and how funds are withdrawn. Employer contributions and certain qualified contributions are excluded from the beneficiary’s gross income.

Additional information is available on the official website (trumpaccounts.gov). Enrollment and account opening are expected to begin in 2026 once the IRS releases the required forms and systems; however, no contributions of any kind may be made until after July 4, 2026.

What These Updates Mean for Planning

Recent changes to gift and estate tax rules provide updated parameters for long-term planning. Understanding how the annual gift exclusion, lifetime exclusion, and new savings options fit together can help families evaluate opportunities, plan proactively, and make informed decisions as part of a broader wealth and estate planning strategy.