The federal estate tax exemption just settled at $15 million per person — $30 million for married couples — with no sunset in sight. For families in the $15 to $30 million range, the math has fundamentally changed. Many couples who previously faced a significant federal estate tax liability now face none at all.
That's a meaningful development. But it doesn't mean estate planning is finished — it means the purpose of the planning has shifted. The exemption addresses one variable in a much larger equation. Controlling how wealth transfers to the next generation, protecting assets from creditors and divorce, and building structure around how heirs access and manage inherited wealth — none of that changes with a higher exemption.
What follows is a framework for thinking about which tools still matter, and why, in this new environment.
The New Math: What $30 Million in Combined Exemption Actually Means
Under the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, the federal estate and gift tax exemption increased to $15 million per person beginning January 1, 2026. That figure will be indexed for inflation annually starting in 2027. Critically, there is no sunset provision — unlike the Tax Cuts and Jobs Act, which had an expiration date baked in.
For married couples using portability (the ability for a surviving spouse to inherit a deceased spouse's unused exemption), the combined exemption is $30 million. The federal estate tax rate remains at 40% on amounts above the exemption.
Consider a hypothetical couple: James and Lisa Carter, with a combined estate of $28 million. Under the new exemption, their federal estate tax exposure is zero. Not reduced — eliminated. By comparison, under the pre-2018 exemption of approximately $5.5 million per person ($11 million combined), the same $28 million estate would have had roughly $17 million in taxable value, potentially generating a federal estate tax liability of approximately $6.8 million at the 40% rate. (This simplified calculation assumes full use of both spouses' exemptions and does not account for deductions, credits, or state taxes that could change the result.)
That's a significant shift in exposure. But the federal estate tax was only one of several reasons these families planned in the first place.
State Estate Taxes: The Hidden Layer
The OBBBA did not change state estate tax laws, and 12 states plus the District of Columbia still impose their own estate taxes — many with significantly lower exemption thresholds. Massachusetts exempts only $2 million. Oregon and Rhode Island exempt just $1 million and approximately $1.8 million, respectively. New York's exemption is $7.35 million in 2026, but it comes with a cliff: if your taxable estate exceeds 105% of the exemption, the entire estate is taxed — not just the excess.
If you live in one of these states, or own property in one, state estate taxes remain a real planning concern regardless of the federal exemption.
Beyond Taxes: What the Exemption Doesn't Protect
Even in states without an estate tax, a $30 million exemption doesn't address several risks that affect families in this wealth range: creditor claims against heirs, divorce exposure (assets inherited outright become commingled marital property far more easily than assets held in trust), lack of structure around how the next generation accesses and manages wealth, and the simple reality that assets passing through probate are public record.
The planning didn't end. The reasons shifted.
When Gifting Still Makes Sense (Even Without Tax Pressure)
With $30 million in combined exemption, many couples in the $15–30 million range no longer need to gift assets to avoid estate taxes. So should they stop gifting entirely?
Not necessarily — the strategic case for lifetime gifting has shifted from tax avoidance to growth capture.
The Freeze Concept
When you gift an asset, you transfer its current value out of your estate. But more importantly, you transfer all future appreciation on that asset out of your estate, too. This is called an estate "freeze" — you freeze the value in your estate at today's number and push the growth to the next generation.
Hypothetical example: Sarah gifts $5 million in growth-oriented investments to an irrevocable trust for her children. Those assets grow at 7% annually. In 15 years, they're worth approximately $13.8 million. If she had kept them in her estate, that $13.8 million would be included in her taxable estate at death. By gifting now, only the original $5 million counts against her lifetime exemption — the $8.8 million in growth transfers tax-free.
For a couple comfortably under the $30 million threshold today, this might not matter immediately. But wealth is not static. Fifteen years of growth, a liquidity event, an inheritance from their own parents — any of these can push an estate above the exemption line. Gifting today may help manage that risk, though the decision involves tradeoffs that depend on individual circumstances.
Initial amount: $5,000,000
Annual return: 7%
Time horizon: 15 years
If Kept in Estate
$13.8M
Full value included in taxable estate at death, potentially subject to 40% federal estate tax
If Gifted to Trust
$5.0M
Only the original gift counts against the $15M exemption — $8.8M in growth transfers tax-free
The Step-Up Tradeoff
Here's where it gets nuanced. Assets you hold at death receive a step-up in cost basis to their fair market value, which eliminates the capital gains tax your heirs would otherwise owe when they sell. Assets you gift during your lifetime do not get this step-up — your heirs inherit your original cost basis.
This creates a real tension. If you gift a highly appreciated asset, your heirs may save on estate taxes but pay more in capital gains taxes. The decision depends on several factors: the asset's embedded gain, the expected growth rate, and the time horizon.
The general framework: gifting tends to win when the asset's expected growth rate significantly exceeds the capital gains tax cost of forfeiting the step-up. For slow-growing or highly appreciated assets, holding until death and capturing the step-up may produce a better after-tax outcome for heirs. This is exactly the kind of analysis that requires running the numbers with your specific situation in mind.
SLATs: The Married Couple's Most Flexible Trust Tool
A Spousal Lifetime Access Trust (SLAT) is an irrevocable trust that one spouse creates for the benefit of the other spouse (and typically their descendants). The funding spouse uses a portion of their lifetime exemption to move assets out of their taxable estate, while the beneficiary spouse retains the ability to receive distributions from the trust.
For married couples in the $20–30 million range, this is often the most practical advanced planning tool available. Here's why.
How It Works
One spouse — let's say James — transfers $5 million into an irrevocable SLAT. Lisa, as a beneficiary, can receive distributions from the trust for her health, education, maintenance, and support. The trust assets (and all future growth) are removed from James's taxable estate. Because Lisa can access the trust, the couple hasn't truly "given up" the assets — they've repositioned them.
The $5 million gift uses a portion of James's $15 million lifetime exemption, leaving $10 million for future gifts or estate tax coverage.
Why It Works for This Wealth Range
Families worth $20–30 million often face a specific tension: they have enough wealth that advanced planning makes sense, but not so much that they can comfortably gift millions without any mechanism to access those funds. A SLAT seeks to address this by removing assets from the estate while preserving indirect access through the beneficiary spouse.
What to Watch For
SLATs are powerful, but they carry real risks that require careful structuring:
The reciprocal trust doctrine. If both spouses create nearly identical SLATs for each other, the IRS may argue that the trusts are reciprocal — effectively meaning each spouse created a trust for themselves — and collapse both trusts back into the taxable estate. To avoid this, the trusts must differ in meaningful ways: different amounts, different distribution standards, different trustees, different beneficiary structures.
Divorce risk. If the couple divorces, the beneficiary spouse may lose access to the trust (depending on the trust terms), while the funding spouse has permanently transferred assets out of their estate. This is an irrevocable decision based on a relationship that may not be permanent.
Loss of control. The funding spouse gives up ownership and control of the assets. An independent trustee typically manages the trust. This is by design — it's what makes the trust effective for tax purposes — but it requires genuine comfort with that transfer of control.
When a SLAT Makes Sense
A SLAT tends to be most appropriate when the couple is confident in their marriage, wants to remove assets from the estate without fully relinquishing access, and has enough wealth outside the trust to maintain their lifestyle independently of trust distributions.
GRATs: Betting on Growth, Tax-Free
A Grantor Retained Annuity Trust (GRAT) is built around a straightforward premise: if the assets inside the trust grow faster than the IRS's assumed rate of return (the Section 7520 rate), the excess growth transfers to your heirs completely free of gift and estate tax.
The Mechanics
You transfer assets into a GRAT and retain the right to receive annuity payments back over a specified term (typically two to five years). At the end of the term, whatever remains in the trust after all annuity payments passes to your beneficiaries.
The IRS values the "gift" component of a GRAT based on the Section 7520 rate, which as of January 2026 is 5.0%. If the assets in the trust grow at exactly 5.0%, all the growth goes back to you through annuity payments, and nothing transfers. If they grow at 8%, the excess — the spread between actual growth and the 7520 rate — passes to your heirs tax-free.
A Hypothetical in Practice
Michael funds a two-year GRAT with $3 million in diversified equities. The 7520 rate at the time of funding is 5.0%. Over the two-year term, the assets return 10% annually. After annuity payments are returned to Michael (totaling approximately $3.14 million, based on the 7520 rate), roughly $420,000 in excess growth passes to his children — completely free of gift or estate tax.
Notes: This is a simplified hypothetical illustration. Actual results depend on asset performance, the applicable 7520 rate at funding, and individual circumstances. Results are not guaranteed.
If the assets underperform the 7520 rate? The GRAT simply unwinds. Michael gets his assets back through the annuity payments, and nothing transfers. That said, GRATs carry risks that should be weighed against the potential benefit: legal and administrative costs of establishing the trust, the opportunity cost of tying up assets during the term, and — critically — if the grantor dies during the GRAT term, the trust assets are generally pulled back into the taxable estate. The mortality risk means term length and the grantor's health are important considerations in structuring any GRAT.
Rolling GRATs
Rather than funding one large, long-term GRAT, many families use a "rolling" strategy — a series of shorter-term GRATs (often two years each) funded sequentially. This approach captures short-term appreciation and limits the risk that a single downturn wipes out the entire benefit.
The 7520 Rate Factor
The Section 7520 rate directly affects how much can transfer tax-free. A lower rate makes GRATs more powerful (because the "hurdle" the assets must clear is lower). At 5.0%, the current rate is moderate by historical standards — neither the ultra-low environment of 2020–2021 (when rates dipped below 1%) nor the higher rates that make GRATs less attractive. It's a reasonable environment for GRAT planning, though not an exceptional one.
Limitations
GRATs work best with assets that are expected to appreciate significantly over the trust term. They're less effective with income-producing assets that generate steady but modest returns. Additionally, because the grantor must survive the trust term for the strategy to work as intended, GRATs are generally structured with shorter terms (two to five years) to mitigate this risk, though shorter terms also mean each individual GRAT may transfer a smaller amount.
IDGTs: The Intentionally "Defective" Power Move
An Intentionally Defective Grantor Trust (IDGT) is deliberately structured to be "defective" for income tax purposes while being effective for estate tax purposes. That distinction is the entire point — and it makes the IDGT one of the most versatile trust structures available.
How It Works
An IDGT is an irrevocable trust that is treated as owned by the grantor for income tax purposes (meaning the grantor pays the income taxes on the trust's earnings) but is treated as a completed transfer for estate and gift tax purposes (meaning the trust assets are outside the grantor's taxable estate).
This creates two potential advantages. First, the trust assets grow without being eroded by income taxes — because the grantor pays those taxes personally, not the trust. Second, the grantor's payment of those income taxes is effectively a tax-free gift to the trust beneficiaries. The IRS does not treat the grantor's income tax payments as additional gifts, even though they clearly benefit the trust.
The compounding effect is significant. If a trust earns $200,000 in income and owes $70,000 in taxes, a regular trust pays that $70,000 from its own assets, leaving $130,000 to grow for beneficiaries. In an IDGT, the grantor pays that $70,000 from their personal funds, and the full $200,000 stays in the trust. Over decades, that difference compounds substantially.
The Simple Version: An Enhanced Trust Fund
At its most straightforward, an IDGT works exactly like the trust fund most people picture when they hear the term — you fund it with cash or marketable securities, name your children or grandchildren as beneficiaries, and let it grow. The difference is that the grantor trust structure means the assets compound without the drag of income taxes.
Hypothetical: Emily and Robert fund an IDGT with $3 million in diversified investments for their two children. The trust is structured so that Emily, as grantor, pays all income taxes on the trust's earnings. Assuming a 7% annual return and a blended 30% tax rate on trust income, the IDGT would grow to approximately $11.4 million over 20 years. An identical non-grantor trust — where taxes are paid from trust assets — would grow to roughly $9.4 million over the same period. That's a $2 million difference attributable entirely to the grantor trust structure, transferred to the children at no additional gift tax cost.
Note: This projection is hypothetical, uses simplified assumptions (7% annual return, 30% blended tax rate), does not reflect actual client results, does not account for fees, inflation, or changing tax law, and is not a guarantee or prediction of future outcomes. Actual results will vary. This approach requires no complex transaction — just a well-drafted trust and the grantor's willingness and financial ability to pay the ongoing income taxes. For families who are planning to establish trusts for their children anyway, making those trusts intentionally defective is one of the simplest ways to amplify the wealth transfer.
Initial funding: $3,000,000
Annual return: 7%
Tax rate on trust income: 30%
Time horizon: 20 years
+$3.8M
The additional wealth transferred to beneficiaries over 20 years, attributable entirely to the grantor paying the trust's income taxes — at no additional gift tax cost.
IDGT (grantor pays taxes)
Non-grantor trust (trust pays taxes)
The Advanced Version: Installment Sale to an IDGT
For families with illiquid or high-growth assets — business interests, real estate, concentrated stock positions, pre-IPO equity — the IDGT becomes even more powerful when combined with an installment sale.
Hypothetical: David transfers a $500,000 "seed" gift to a new IDGT, then sells $4 million in closely held business interests to the trust in exchange for a promissory note bearing the Applicable Federal Rate (AFR). The note requires interest-only payments with a balloon payment at maturity.
Because the trust is a grantor trust, the sale is ignored for income tax purposes — no capital gains tax is triggered on the transfer. The business interests (and all future appreciation) are now outside David's estate. As long as the assets grow faster than the AFR on the note, the excess growth transfers to David's beneficiaries free of estate and gift tax.
David continues to pay the income taxes on the trust's earnings personally, further enriching the trust.
The installment sale structure allows for transferring significant value while using only a modest amount of the grantor's lifetime exemption (just the initial seed gift). But it adds meaningful complexity: independent appraisals of transferred assets, promissory note administration, and careful documentation.
When to Use Which Approach
The straightforward funded IDGT is the right starting point for most families in this wealth range. It's simpler to establish, works with any asset class, and the ongoing tax payment by the grantor provides a steady, compounding benefit over time. The installment sale layer makes sense when you have a specific illiquid asset you want to move out of the estate — a business, investment real estate, or a concentrated equity position — and you want to minimize the lifetime exemption consumed in the process.
Either way, IDGTs require careful drafting and coordination between your estate planning attorney, CPA, and wealth advisor. The trust must be properly maintained as a separate entity, and the grantor needs sufficient liquidity outside the trust to cover the ongoing income tax payments without creating cash flow strain.
Choosing the Right Tool: A Decision Framework
These three strategies — SLATs, GRATs, and IDGTs — are not mutually exclusive. Many families in the $15–30 million range use a combination, tailored to their specific circumstances. The right choice depends on your goals, your comfort with irrevocability, and the nature of the assets you're considering transferring.
Here's a simplified framework for thinking about which tool fits where:
Comparison of SLAT, GRAT, and IDGT trust strategies across seven key planning dimensions
| Factor |
SLAT |
GRAT |
IDGT |
| Primary Goal |
Remove assets from estate while retaining indirect access through beneficiary spouse |
Transfer asset growth above a hurdle rate (Section 7520 rate) to heirs tax-free |
Supercharge trust growth by having the grantor absorb all income taxes |
| Access to Assets |
Beneficiary spouse can receive distributions for health, education, maintenance, and support |
Grantor receives annuity payments during the trust term |
No access — assets are transferred or sold to the trust permanently |
| Best Asset Types |
Diversified investments, liquid assets |
High-growth potential assets, publicly traded securities |
Any asset class; especially powerful with illiquid or high-growth assets via installment sale |
| Complexity |
Moderate |
Moderate |
High |
| Lifetime Exemption Used |
Yes — the full amount transferred counts against the $15M exemption |
Minimal — a properly structured "zeroed-out" GRAT uses almost none |
Partially — only the initial seed gift (typically 10–15% of total value transferred) |
| Risk if Assets Decline |
Assets remain outside the estate regardless of performance |
No transfer occurs; grantor receives assets back through annuity payments |
Promissory note payments still due; trust may face liquidity strain |
| Key Concerns |
Reciprocal trust doctrine if both spouses create similar SLATs; divorce risk eliminates access |
If grantor dies during the term, assets return to taxable estate; underperformance means no transfer |
Valuation challenges for illiquid assets; administrative complexity; grantor must maintain liquidity for tax payments |
The most important question isn't "which trust should I use?" It's "what am I actually trying to accomplish?" Asset protection, growth transfer, maintaining access, minimizing complexity — these goals often pull in different directions. The right plan balances them based on your specific family circumstances.
The Planning Didn't End — It Evolved
A $30 million combined exemption is genuinely good news for married couples in this wealth range. For many, the federal estate tax is no longer the primary driver of their planning. But the exemption addressed one variable in a much larger equation.
State estate taxes still apply in a dozen states. Asset protection concerns don't disappear with a higher exemption. The question of how (not just whether) wealth transfers to the next generation remains as important as ever. And the reality that today's exemption could be tomorrow's legislative target — while there's no sunset, Congress can always change the rules — argues for taking advantage of current law rather than assuming it's permanent.
The old urgency was about beating a deadline. The new opportunity is about planning more deliberately, with more tools and more flexibility, and without the pressure of an arbitrary expiration date.
If you're in this range and wondering whether your current estate plan still reflects the world we're actually in, we're happy to think through it with you.