Wondering how much coverage a carrier would approve? Try the coverage limit calculator →
Since the 2025 tax law set the federal estate tax exemption at $15 million per person for 2026 ($30 million for a married couple), indexed for inflation with no scheduled sunset, far fewer families owe federal estate tax. Life insurance still matters in estate planning for estates above those amounts, for illiquid estates built on a business or real estate, for equalizing inheritances, and for reviewing old policies bought under the old rules that may now be the wrong size, the wrong owner, or quietly lapsing.
Who does what
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 changed in 2026
For years, estate planning ran on a deadline. The higher exemption from the 2017 tax law was scheduled to fall by about half at the start of 2026, and many families bought life insurance or moved policies into trusts to prepare for that drop. The One Big Beautiful Bill Act, signed July 4, 2025, replaced the sunset with a $15 million basic exclusion for 2026, indexed for inflation starting in 2027. The top estate tax rate stays at 40%, and the annual gift exclusion is $19,000 per recipient for 2026.
Two things follow. Many couples who planned for a smaller exemption no longer face a federal estate tax at all. And many policies bought for that tax are now worth a fresh look: some still fit, some are too large, and some (older universal life in particular) are underfunded. "Permanent" in the press means there is no scheduled end date; Congress can still change the law.
The full numbers and what to watch for 2027 are in our estate and gift tax limits guide.
Where life insurance still fits
| Situation | Why insurance helps | Read next |
|---|---|---|
| Estate above $15M single or $30M married | Pays the 40% tax without forcing a sale of the business or real estate | Do you still need it? |
| Most of the estate is one business or property | Creates cash for heirs who do not run the business and for estate costs | Family business succession |
| Married couple with a large combined estate | One survivorship policy pays at the second death, when the tax is due | Survivorship vs portability |
| Coverage should stay out of the taxable estate | An irrevocable trust can own the policy | ILITs explained |
| An old policy no longer fits | Review, reshape with a 1035 exchange, or keep | Old-policy audit |
Ownership: the trust question
Life insurance you own is part of your gross estate for federal estate tax (Section 2042). When an estate is large enough to owe tax, the usual fix is an irrevocable life insurance trust that buys and owns the policy from the start, funded with annual gifts. Moving an existing policy into a trust works too, but the three-year rule of Section 2035 pulls the proceeds back into the estate if you die within three years of the transfer. Our guides on Crummey letters and the three-year rule cover the mechanics.
Trusts are not only for tax. They control when and how heirs receive money, protect a beneficiary who is young or has creditor problems, and keep proceeds out of probate. With a higher exemption, those non-tax reasons are now the main reason many families keep a trust.
Buying well: amounts, illustrations and underwriting
Larger policies get more scrutiny. Carriers justify coverage by income (a multiple that shrinks with age), by projected estate tax, or by a business purpose, and they count every policy you own or have applied for. Our how much life insurance can I get guide and coverage limit calculator show the typical ranges.
Permanent policies are sold with illustrations, which mix guaranteed values with projections. Learning to read the guaranteed column, the assumed rate and the year the policy would lapse under guarantees is the best protection you have. See how to read a life insurance illustration.
Florida and Tennessee notes
Florida protects the cash surrender value of life insurance from the owner's creditors under Florida Statute 222.14, and death proceeds payable to a named beneficiary from the insured's creditors under 222.13. That makes cash value policies a planning tool for Florida residents in high-liability professions. Tennessee protects policies payable to a spouse, children or dependent relatives. See Florida creditor protection and moving to Florida or Tennessee.
Every guide in this series
Do you still need estate planning life insurance?
The $15M Exemption: Do You Still Need Estate Life Insurance?
Who still needs coverage for estate tax, who can scale back, and what to check first.
Estate and Gift Tax Limits: 2026 and 2027
Exemptions, the annual exclusion, portability, and when the 2027 numbers arrive.
Survivorship Life Insurance vs Portability
How second-to-die coverage works and the couples it still fits.
Trusts
What Is an ILIT, and Is It Still Worth It?
How the trust keeps proceeds out of your estate and when it still makes sense.
Crummey Letters and the Annual Gift Exclusion
How withdrawal notices qualify trust gifts, timing, and the 5-and-5 rule.
The Three-Year Rule for Life Insurance
Why transfers to a trust can be pulled back into your estate, and the options.
Buying and reviewing policies
How Much Life Insurance Can I Get?
Income multiples by age, estate and business justifications, and the paperwork.
How to Read a Life Insurance Illustration
Guaranteed vs projected columns, assumed rates, IUL limits and lapse years.
7 Signs Your Universal Life Policy Could Lapse
Warning signs, how to get an in-force illustration, and what you can do.
1035 Exchange: Swap a Policy Without a Tax Hit
Allowed exchanges, loans, new contestability and when an exchange makes sense.
Life Insurance Coverage Limit Calculator
Typical carrier income multiples by age, minus coverage you already have.
Giving and Florida
Life Insurance and Charitable Giving in 2026
Ways to give a policy, how the deduction works, and the new 2026 limits.
Florida Life Insurance Creditor Protection
What 222.13 and 222.14 protect, what they do not, and planning tips.
Moving to Florida or Tennessee? Review Your Coverage
Domicile, state estate taxes left behind, creditor protection and trust updates.
Frequently asked questions
Do I need estate planning life insurance with a $15 million exemption?
Most families with estates under $15 million (single) or $30 million (married, using portability) will not owe federal estate tax under current law. Life insurance can still make sense for larger estates, illiquid estates, equalizing inheritances, state estate taxes in states that have them, and families who want a trust to control how heirs receive money.
Is the $15 million exemption really permanent?
The law has no scheduled sunset, unlike the 2017 version. That is what people mean by permanent. Congress can still change estate tax law in the future, so plans built for flexibility hold up best.
Should I cancel a policy I bought for estate tax?
Not before a review. A policy you no longer need for tax may still serve another goal, may be hard to replace at your current age and health, or may have more value sold or exchanged than surrendered. Get an in-force illustration and talk to your attorney first.
Who should own a life insurance policy for estate planning?
If estate tax is a real possibility, an irrevocable life insurance trust usually owns it so the proceeds stay out of your taxable estate. If estate tax is unlikely, owning it personally or having a spouse own it may be simpler. Your estate attorney makes that call.
Talk through your estate plan coverage
Tell us who the coverage would insure and roughly what it is for. Erik will come back with quotes and illustrations your attorney and CPA can review. Existing policy reviews are welcome too.
- Erik reviews who the coverage would insure and what it is for.
- He prepares quotes and illustrations your attorney and CPA can review.
- You decide together, on a call with your advisers if you like. Existing policy reviews are welcome.
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
- IRS: One, Big, Beautiful Bill provisions (Public Law 119-21)
- IRS Revenue Procedure 2025-32 (2026 inflation adjustments)
- IRS: Estate tax
- 26 U.S. Code 2042: proceeds of life insurance in the gross estate (Cornell LII)
- 26 U.S. Code 2035: transfers within three years of death (Cornell LII)
- Florida Statutes 222.14: exemption of cash surrender value of life insurance and annuities
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.