Estate Tax Exemption Changes in 2026: What Arizona Families Need to Know

For years, families with significant assets have been watching the federal estate tax exemption because the higher exemption created by the Tax Cuts and Jobs Act was originally scheduled to decrease after 2025.

That expected decrease did not happen.

A federal law enacted in 2025 increased the federal basic exclusion amount to $15 million for 2026. For families who were preparing for a substantial reduction in the exemption, this is an important change to understand.

For Arizona families, the higher exemption may mean that fewer estates are subject to federal estate tax. However, the change does not mean estate planning is no longer necessary. Families with substantial assets should still review their estate plans, trusts, beneficiary designations, business interests, and lifetime gifting strategies to make sure their plans reflect current law and their long-term goals.

 

What Is the Federal Estate Tax Exemption in 2026?

The federal estate tax exemption, also called the basic exclusion amount, determines how much an individual can generally transfer through gifts during life and at death before the federal estate tax applies.

For 2026, the basic exclusion amount is $15 million per individual, up from $13.99 million for people who died in 2025.

This means an individual whose taxable estate is below the applicable federal exclusion will generally not owe federal estate tax solely because of the value of the estate.

The federal estate tax system is more complicated than simply adding up assets, however. The calculation can involve lifetime taxable gifts, deductions, transfers between spouses, and other factors.

 

Did the Estate Tax Exemption Sunset in 2026?

No.

The original rules under the Tax Cuts and Jobs Act were scheduled to reduce the higher federal estate tax exemption after 2025. That is why many estate planning discussions leading into 2026 focused on the possibility of a major reduction.

Congress changed the outcome.

Legislation signed into law in July 2025 increased the basic exclusion amount to $15 million for calendar year 2026. The amount will also be adjusted for inflation beginning in future years.

This means Arizona families who based their estate planning decisions on an expected 2026 reduction should consider reviewing those plans rather than assuming the previous rules still apply.

 

Does Arizona Have an Estate Tax?

Arizona does not currently impose a separate estate or inheritance tax on estates of people who die after 2004. The Arizona Department of Revenue explains that the state’s estate tax provisions were repealed following the elimination of the federal state death tax credit.

That does not eliminate the possibility of federal estate tax.

Arizona residents with substantial estates can still be subject to federal estate tax if their taxable estate and applicable adjustments exceed the federal exclusion amount.

For this reason, families should consider both their Arizona circumstances and the federal rules when reviewing an estate plan.

 

What Assets Are Included in an Estate?

The value of an estate is not limited to the money sitting in a checking or savings account.

Depending on the circumstances, an estate may include:

• Real estate

• Investment accounts

• Business interests

• Retirement accounts

• Life insurance

• Bank accounts

• Valuable personal property

• Certain trust interests

• Other property and financial interests

For example, an Arizona business owner may have substantial wealth tied up in a privately held company rather than cash.

A family that owns several properties may also have an estate that has increased considerably in value over time.

This is why estate tax planning should consider not only what the family owns today but also how those assets may change in value.

 

Why the 2026 Exemption Still Matters to Arizona Families

The $15 million exemption is high enough that many families will never owe federal estate tax.

But families with substantial or rapidly appreciating assets should not assume that the current exemption eliminates the need for planning.

Your Assets May Increase in Value

An estate that is below the $15 million threshold today could be worth significantly more in the future.

Consider assets such as:

• A growing business

• Investment properties

• Stocks and other investments

• Retirement accounts

• Life insurance proceeds

• Valuable real estate

Future appreciation can change the size and structure of an estate.

Estate planning can help families consider that future growth instead of looking only at today’s balance sheet.

Your Existing Estate Plan May Be Based on Older Rules

Some trusts and estate plans were created when the federal exemption was expected to decrease substantially in 2026.

That does not automatically make those documents inappropriate or invalid.

However, certain provisions may have been drafted around assumptions that are no longer accurate.

For example, a trust formula designed around a much lower federal exemption could produce a different result under the current $15 million exemption.

A review can help determine whether the existing plan still reflects the family’s intentions.

 

What Should Arizona Families Review in 2026?

Families with significant assets may want to review several parts of their estate plan.

1. Review Your Will and Trusts

Start with the documents that control what happens to your property after death.

This may include:

• Your will

• Revocable living trust

• Irrevocable trusts

• Marital trusts

• Dynasty trusts

• Other estate-planning documents

Pay particular attention to provisions that were created specifically because of the expected reduction in the federal exemption.

2. Review Beneficiary Designations

Your estate plan does not consist only of your will or trust.

Retirement accounts and life insurance policies commonly pass according to beneficiary designations.

If those designations are outdated or inconsistent with your estate plan, assets may not pass according to your current wishes.

A review should include retirement accounts, life insurance policies, investment accounts, and other assets with designated beneficiaries.

3. Consider Lifetime Gifting

Lifetime gifting can be part of an estate planning strategy for families with significant wealth.

The federal annual gift tax exclusion is $19,000 per recipient for 2026. The lifetime basic exclusion amount for gift and estate tax purposes is $15 million for 2026.

These are different rules.

Making a gift above the annual exclusion does not necessarily mean that gift tax is immediately owed. Larger gifts can involve reporting requirements and may affect the donor’s available lifetime exclusion.

Because gifting can have estate, gift, income-tax, and other consequences, substantial gifts should be considered carefully.

Families considering significant transfers of property may benefit from reviewing [gifting property as part of an estate plan] with an attorney before making the transfer. gifting property as part of an estate plan

4. Consider Future Appreciation

Families with significant wealth should also consider how their assets may grow.

A business worth $8 million today could be worth considerably more in the future. The same may be true of real estate, investment accounts, and other appreciating assets.

Estate planning strategies may be available to address future appreciation, depending on the family’s circumstances and objectives.

5. Review Business Interests

Business owners may have additional estate planning concerns.

A business interest can represent a substantial portion of an individual’s estate. Without appropriate planning, transferring that interest after death can create tax, ownership, management, or family issues.

Business succession and estate planning should therefore be coordinated when appropriate.

 

What Does the 2026 Change Mean for High-Net-Worth Families?

For families with substantial assets, the higher exemption may provide more flexibility.

However, high-net-worth estate planning involves more than determining whether an estate exceeds $15 million.

Families may need to consider:

• Business ownership

• Real estate

• Investment portfolios

• Trust structures

• Lifetime gifts

• Charitable planning

• Life insurance

• Retirement accounts

• Family succession

• Asset protection

• Future appreciation

Families with significant wealth may benefit from reviewing their options with an attorney who understands the relationship between trusts, estate planning, and tax considerations.

Citadel Law Firm also provides information about estate planning for high-net-worth families and the role of a trust attorney.

 

What About Married Couples?

Married couples have additional estate planning considerations.

The federal estate tax rules allow a surviving spouse to potentially use a deceased spouse’s unused exclusion amount through portability, provided the required election is properly made.

The IRS states that an estate tax return may be required to make the portability election even when the estate would not otherwise be required to file because of its size.

For couples with significant assets, this makes it important to review how assets are owned, how trusts are structured, and whether the appropriate elections have been made after the death of a spouse.

 

Do You Need Estate Tax Planning If Your Estate Is Under $15 Million?

Not necessarily for federal estate tax purposes.

Many Arizona families will have estates below the federal exemption and will not owe federal estate tax.

But estate planning serves purposes beyond reducing estate taxes.

An estate plan can also help you:

• Control how beneficiaries receive inherited assets

• Plan for incapacity

• Protect assets for certain beneficiaries

• Address blended-family concerns

• Plan for business succession

• Coordinate real estate

• Reduce potential disputes

• Avoid unnecessary probate

• Provide instructions for your family

The $15 million exemption should therefore be viewed as one part of estate planning, not a reason to stop planning altogether.

Having an old trust with exception provisions that are outdated my cause issues and unnecessary trust administration and extra costs for your family. Work closely with your trust attorney in Arizona to have the proper trust for your family. 

 

What If Your Estate Is Close to $15 Million?

Families approaching the federal exemption should consider obtaining professional advice before making major financial or estate-planning decisions.

The value of an estate can change because of:

• Real estate appreciation

• Business growth

• Investment gains

• Retirement account growth

• Life insurance

• Lifetime taxable gifts

• Changes in family circumstances

The federal estate tax filing threshold for 2026 is $15 million, although the actual estate tax calculation can involve additional factors, including adjusted taxable gifts and other applicable rules.

This is particularly important for business owners, real estate investors, and families whose assets are growing quickly.

 

Should You Change Your Estate Plan Because of the 2026 Exemption?

Not automatically.

The right decision depends on how your current documents were drafted and what you want your estate plan to accomplish.

A review may be especially useful if:

• Your estate plan was created several years ago

• Your assets have increased significantly

• You own a business

• You recently acquired real estate

• You have created or inherited substantial wealth

• Your family circumstances have changed

• Your trust contains tax-based formulas

• Your beneficiary designations have not been reviewed recently

• Your trust split after the first death for tax reasons. 

The goal is not simply to change documents because the federal exemption changed.

The goal is to determine whether your current plan still works.

 

Frequently Asked Questions 

What is the estate tax exemption for 2026?

The federal basic exclusion amount is $15 million per individual in 2026, compared with $13.99 million in 2025.

Did the estate tax exemption decrease in 2026?

No. The exemption was originally expected to decrease after 2025 under the prior law, but legislation enacted in 2025 increased the 2026 basic exclusion amount to $15 million.

Does Arizona have an estate tax?

Arizona does not currently impose a separate estate or inheritance tax on estates of people who die after 2004. Federal estate tax rules can still apply.

How much can you give someone without using the lifetime exemption in 2026?

The annual gift tax exclusion is $19,000 per recipient for 2026. Certain gifts may have different rules and reporting requirements.

Does a living trust eliminate estate taxes?

A revocable living trust generally does not remove the grantor’s assets from the taxable estate. Certain irrevocable trust strategies may have estate-tax implications, but the appropriate strategy depends on the individual’s circumstances.

Should I update my estate plan because of the 2026 exemption?

Not necessarily. However, if your estate plan was drafted around the expected reduction in the federal exemption, reviewing the plan can help determine whether its provisions still match your goals.

Review Your Estate Plan With an Arizona Attorney

The federal estate tax rules for 2026 are different from what many families expected before the end of 2025. The basic exclusion amount is now $15 million per individual, and the expected reduction did not occur.

For Arizona families with substantial assets, this is a good time to review an existing estate plan rather than relying on assumptions made under the previous law.

An Arizona estate planning attorney can help you review your wills, trusts, beneficiary designations, business interests, and other estate-planning documents in light of your current circumstances.

The objective is not simply to avoid estate tax. It is to create a plan that protects your assets, reflects your wishes, and provides a clear path for your family.

Schedule a consultation with Citadel Law Firm to discuss your estate planning goals and determine whether your current plan should be reviewed for 2026.