In 2021, advisors were racing to help clients use their exemption before it shrank. That urgency is gone: the exemption is now $15 million per person and no longer scheduled to drop. The planning question has shifted from “how fast” to “what’s the smartest way to use it.”
Key takeaways
- The federal gift and estate exemption is $15 million per person from 2026, with no scheduled sunset.
- Lifetime gifts move future appreciation out of the estate, but heirs inherit the donor’s income tax basis rather than a step-up.
- Life insurance premiums gifted to an irrevocable trust can multiply the value of exemption and annual exclusion gifts.
Gifts shift future growth out of the estate — but gifted assets keep the donor’s basis. Give low-gain assets; keep highly appreciated ones for the step-up at death.
What changed since 2021
Back then, proposals would have cut the exemption early, and the 2017 law’s increase was scheduled to expire at the end of 2025. Neither happened as feared: the One Big Beautiful Bill Act set a permanent $15 million per-person exemption from 2026. See what the permanent exemption means.
Considerations before making large gifts
- Control: clients may be uneasy giving away large amounts outright. A family LLC lets them gift non-voting interests while keeping control.
- Basis: recipients take the donor’s income tax basis. Gift assets with little built-in gain, and leave highly appreciated assets to pass at death with a step-up.
- Married couples: each spouse has an exemption. Consider which spouse’s exemption to use first, and watch community property rules when retitling assets.
- Future law changes: “permanent” means no scheduled sunset, not immunity from future legislation. Using exemption now locks in the benefit.
Where life insurance adds leverage
Gifts to an irrevocable life insurance trust (ILIT) used to pay premiums can turn a modest annual gift into a much larger, income-tax-free death benefit outside the estate. Premium gifts can often be covered by the annual exclusion ($19,000 per recipient in 2025) using Crummey withdrawal powers, preserving lifetime exemption for other planning. For larger single-premium designs, part of the lifetime exemption can be used.
Frequently asked questions
How much can I gift without paying gift tax in 2026?
Each person can give up to $15 million over their lifetime free of federal gift tax, in addition to annual exclusion gifts to each recipient.
Is it better to gift assets now or leave them at death?
It depends. Gifting removes future growth from the estate, but assets left at death generally get a step-up in basis. Low-gain assets are often better gifts.
How does life insurance fit into lifetime gifting?
Gifts to an irrevocable trust can pay premiums on a policy whose death benefit passes outside the estate, multiplying the value of the gift.
Reviewed by Tim Fuller on 2026-09-25
Tim Fuller
President, SRS Inc.
Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.
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