Under the One Big Beautiful Bill Act, the federal estate tax exemption is $15 million per person for 2026, indexed for inflation from 2027, with no scheduled sunset; a married couple using portability can shelter about $30 million. Families below those amounts generally no longer need life insurance for federal estate tax. Coverage still earns its place for larger estates, illiquid estates (a business or real estate), equalizing inheritances, state estate taxes where they apply, and as a trust-owned asset for control and creditor protection.
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We are licensed insurance brokers, not CPAs or attorneys. Treat the tax and legal points on this page as general education, and confirm them with your own CPA or attorney before acting.
On this page
What the law says now
The 2017 tax law roughly doubled the exemption but scheduled it to drop back at the start of 2026. Many families bought insurance, made large gifts or set up trusts to prepare for that drop. The One Big Beautiful Bill Act, signed July 4, 2025, replaced the sunset: the basic exclusion amount is $15,000,000 for 2026, adjusted for inflation starting in 2027. The gift tax and generation-skipping transfer tax exemptions match it. The top estate tax rate remains 40%.
"Permanent" means no end date is written into the law. Congress can still change it, as it has many times. The safest plans work under today's rules and still hold up if the rules change.
Who still needs it
| Your situation | Still need estate life insurance? |
|---|---|
| Estate well under $15M single or $30M married | Not for federal estate tax. Maybe for other goals below. |
| Estate near the line and growing | Possibly. Project growth to life expectancy; a fast-growing business can cross it. |
| Estate above the exemption | Often yes. Tax at 40% on the excess is due nine months after death. |
| Most of the estate is a business or real estate | Often yes, for liquidity, even if tax is modest. |
| One child runs the business, others do not | Often yes, to equalize; see family business succession. |
| You live in, or own property in, a state with its own estate or inheritance tax | Check state thresholds, which are often far lower than federal. |
A quick way to estimate exposure
A married couple owns a company worth $14 million, a home and investments worth $6 million, and $4 million of life insurance they own personally: $24 million in total, including the insurance. With portability, about $30 million is sheltered in 2026, so no federal tax today. But if the company doubles in ten years and the exemption only grows with inflation, they could be several million dollars over the line, and the personally owned insurance itself is part of the taxable estate. A survivorship policy owned by a trust, or moving the existing coverage into a trust, could be worth modeling.
Remember that life insurance you own counts in your estate under Section 2042. Many families who think they are under the line are not, once their own policies are added.
What to do with policies you already have
If you bought coverage for an estate tax that now looks unlikely:
- Do not cancel on reflex. At an older age or with health changes, the same coverage may be impossible to replace.
- Get an in-force illustration showing how long the policy lasts at current and guaranteed assumptions; see old-policy audit.
- Repurpose it: income for a surviving spouse, equalizing heirs, a charitable gift, or a legacy for grandchildren through a trust.
- Reshape it: reduce the death benefit, or exchange it tax-free under Section 1035 for a policy that fits; see 1035 exchanges.
- Consider selling it if you are older and no longer need it; a life settlement can be worth more than the cash surrender value.
Should you keep the trust?
Many irrevocable life insurance trusts were created mainly for estate tax. Even with a higher exemption, trusts still control how and when heirs receive money, protect beneficiaries from their own creditors and divorces, and keep proceeds out of probate. Unwinding an irrevocable trust is also not simple. Talk to your estate attorney before changing anything; our ILIT guide covers the trade-offs.
Frequently asked questions
What is the federal estate tax exemption for 2026?
$15,000,000 per person, under the One Big Beautiful Bill Act. It is indexed for inflation starting in 2027. A married couple can shelter about $30 million using portability.
Will the estate tax exemption go down again?
Not under current law, which has no scheduled sunset. Congress can change the law in the future, so flexible plans are wise.
Does life insurance count toward my estate?
Yes, if you own the policy or have incidents of ownership at death, the death benefit is included in your gross estate under Section 2042. A policy owned by a properly drafted irrevocable trust from the start is generally not included.
Start your life insurance request
Tell us what the coverage is for and who it would cover. For most requests we ask for each person's date of birth and sex so Erik can prepare for the call. We do not ask health or tobacco questions in this initial request. This is a request for help, not an insurance application or a promise of coverage.
Written by Erik Moran
Erik co-owns Moran Insurance Group with Amanda Moran and handles the agency's life insurance cases, from key person and buy-sell coverage to trust-owned policies. He works alongside clients' CPAs and attorneys, who make the tax and legal calls. More about Erik.
Sources
Moran Insurance Group is a licensed insurance agency. Our brokers are not CPAs, attorneys or tax advisors, and nothing on this page is tax, legal or investment advice. Tax figures and rules reflect our understanding as of October 2026 and can change. Coverage is subject to carrier underwriting and state availability. Confirm anything tax or legal with a licensed CPA or attorney before you act on it.