December 2024. Every trusts-and-estates group I track had the same line item on the whiteboard. A countdown. Roughly twelve months until the federal exemption was scheduled to cut in half. Partners were booking valuation appraisals into the second quarter. Associates were drafting spousal lifetime access trusts on a queue. The pipeline was full and the reason was simple. A clock.<\/p>\n
Then the clock got unplugged.<\/p>\n
I want to walk the numbers on this, because the story that ran from 2018 through the middle of 2025 was a demand story built almost entirely on a deadline. Kill the deadline and you change the demand. Not the volume of work overall. The mix. That distinction is where firms either reposition correctly or spend 2026 wondering why the gifting calendar went quiet.<\/p>\n
Start at the origin. The Tax Cuts and Jobs Act of 2017, Pub. L. No. 115-97, doubled the basic exclusion amount. The statutory mechanic sits in IRC section 2010(c)(3), which the Act amended to raise the base figure from $5 million to $10 million, indexed for inflation. Effective January 1, 2018.<\/p>\n
Run the indexed figures. The 2018 exclusion landed near $11.18 million per person. By 2025 it had climbed to $13.99 million. A married couple in 2025 could shield close to $27.98 million with proper portability or trust structure. Those are documented IRS inflation-adjusted numbers, not projections.<\/p>\n
Here is the part that generated the work. The same Act attached an expiration. The doubling was written to sunset after December 31, 2025, and revert the base to the pre-Act $5 million figure, indexed. Estimates put the reverted per-person amount somewhere around $7 million.<\/p>\n
So the math on the table for a high-net-worth client was blunt. Use roughly $14 million of exemption now, or watch about half of it disappear on a fixed date. Economists call that a use-it-or-lose-it dynamic. Estate planners called it a decade of billable hours.<\/p>\n
The Treasury removed the one variable that might have scared clients off. Anti-clawback. The final regulations, T.D. 9884 (2019), confirmed that a taxpayer who made large gifts while the exemption was high would not have those gifts retroactively taxed if the exemption later dropped. Section 20.2010-1(c) of the estate tax regulations locked it in. Translation for the intake sheet: gift now, keep the benefit, no penalty if the number falls in 2026.<\/p>\n
That single regulation converted hesitation into action. Without it, half the SLAT pitches die on the first meeting.<\/p>\n
Watch what got sold, because it tells you what unwinds.<\/p>\n
The spousal lifetime access trust was the workhorse. A SLAT lets one spouse gift assets out of the estate while the other spouse retains indirect access as a beneficiary. It moves value off the balance sheet for transfer-tax purposes without fully surrendering the household’s access to the funds. When your entire pitch is beat the sunset but keep some liquidity, the SLAT answers the objection.<\/p>\n
Firms drafted them in pairs. Non-reciprocal pairs, specifically, to avoid the reciprocal trust doctrine that traces back to United States v. Estate of Grace<\/em>, 395 U.S. 316 (1969), where the Supreme Court collapsed two mirror-image trusts and pulled the assets back into the estate. Good drafting meant different terms, different funding, different timing. Sloppy drafting meant the whole exercise failed an audit. The volume of SLAT work in 2020 through 2025 pushed a lot of associates through a fast education on Grace.<\/p>\n Then the gifting waves. Two visible surges.<\/p>\n The first hit in 2020 and 2021. Part deadline anxiety, part a live fear that a new Congress would accelerate the sunset or lower the exemption early. The 2021 proposals inside the various Build Back Better drafts floated cutting the exemption to $5 million or so effective 2022. Those proposals died. But they moved money. Clients gifted in size during that window because the political risk looked immediate.<\/p>\n The second wave built through 2024 and into 2025 as the statutory sunset came into actual view. This one was calendar-driven rather than headline-driven. Different psychology, same output. Completed gifts, funded trusts, filed Forms 709.<\/p>\n And the valuation work. This is the piece analysts underweight.<\/p>\n Every serious gift of a closely held interest needs an appraisal. Every discount for lack of marketability or lack of control needs support that survives scrutiny. So the sunset didn’t just feed law firms. It fed the business-valuation shops, the appraisers, the forensic accountants. A gift of a minority LLC interest at a 30 percent combined discount is a defensible position with a real report behind it and a liability without one.<\/p>\n The IRS spent the same years tightening the rope on aggressive structures. Estate of Powell v. Commissioner<\/em>, 148 T.C. 392 (2017), expanded the reach of IRC section 2036 over family limited partnerships where the decedent kept too much control, pulling assets back into the gross estate at full value. Estate of Cahill v. Commissioner<\/em>, T.C. Memo. 2018-84, went after an intergenerational split-dollar arrangement. Practitioners who read those opinions drafted more carefully. The ones who didn’t fed the Tax Court its next round of memos.<\/p>\n Then the buy-sell bomb. Connelly v. United States<\/em>, 602 U.S. 257 (2024). A unanimous Supreme Court held that life insurance proceeds a corporation receives to fund a stock redemption increase the value of the company for estate tax purposes, and the redemption obligation does not offset that value. Overnight, a standard closely held business succession structure got repriced. Every firm with business-owner clients had to reopen buy-sell files and rerun the estate exposure. That case alone generated a documented spike in succession-planning review work through the back half of 2024.<\/p>\n So the picture heading into 2025 was a practice running hot on three engines. Trust drafting. Gifting execution. Valuation and defense. All of it fed by one deadline.<\/p>\n The deadline is gone.<\/p>\n On July 4, 2025, the One Big Beautiful Bill Act, Pub. L. No. 119-21, became law. Among a long list of tax provisions, it addressed the exemption directly. Instead of letting the doubling sunset into a roughly $7 million figure, the Act set the basic exclusion amount at $15 million per person beginning in 2026, indexed for inflation thereafter. The generation-skipping transfer tax exemption was set to match at $15 million.<\/p>\n Read that against the counterfactual. The scheduled outcome was a drop to about $7 million. The delivered outcome is a rise to $15 million, made permanent in the sense that it carries no built-in expiration date. A married couple now looks at roughly $30 million of combined shelter from 2026, before indexing pushes it higher.<\/p>\n Permanent is a word I use carefully. No statute is permanent. Congress can amend section 2010 again whenever it assembles the votes, exactly as it did in 2017 and again in 2025. What changed is the removal of the automatic reversion. There is no longer a date on the calendar doing the selling for you. That is the operative fact for anyone modeling 2026 demand.<\/p>\n Now do the client-count math, roughly and honestly.<\/p>\n At a $7 million per-person exemption, a large slice of upper-middle-class and business-owning households would have crossed into taxable-estate territory. Homes plus retirement accounts plus a business interest plus life insurance adds up faster than clients think, and $7 million is not a high bar in coastal markets. The sunset would have manufactured a new tier of taxable estates by arithmetic alone.<\/p>\n At $15 million per person, that manufactured tier evaporates. A couple sheltering $30 million covers the overwhelming majority of households that a $14 million tier already covered, plus the ones the reversion would have swept in. The population of clients who owe federal estate tax, already small, stays small and does not grow the way the sunset would have forced it to grow.<\/p>\n Fewer taxable-estate clients. That is the headline for the federal transfer-tax practice. If your revenue model assumed the sunset would refill the funnel, the model is wrong now.<\/p>\n Here is where I disagree with the panic take. The federal exemption reset shrinks one revenue line. It does not empty the practice. The work migrates. If you read the practice as nothing but a federal-transfer-tax shop, you misread it, and you will cut the wrong staff.<\/p>\n State estate and inheritation taxes are the first thing that does not care about $15 million.<\/p>\n Roughly a dozen states plus the District of Columbia impose their own estate or inheritance taxes, and their exemptions sit far below the federal number. The gap between the two is the entire game.<\/p>\n Add Illinois at a $4 million threshold with no portability, plus Minnesota, Maryland, Connecticut, Rhode Island, Vermont, Hawaii, Maine, and the inheritance-tax states like Pennsylvania and New Jersey and Nebraska. None of these track the federal $15 million. Every one of them keeps a client with real but not enormous wealth inside the planning population.<\/p>\n So the intake question changes. It stops being does this client owe federal estate tax and becomes what does this client’s home state do. A $6 million estate in Texas is a non-event federally and at the state level. A $6 million estate in Oregon or Washington or a $7.5 million estate in New York is an active engagement. Same balance sheet, different zip code, different bill.<\/p>\n Firms in high-threshold states do face a genuine contraction in transfer-tax-driven work. Firms in Oregon, Washington, Massachusetts, New York, Minnesota, and the other decoupled states do not. If anything, the federal noise clearing out lets those firms sell state planning without a client’s attention split toward a federal deadline that no longer exists.<\/p>\n Now the part that should reshape how practices market themselves. When the estate tax stops threatening a client, the income tax does not.<\/p>\n The mechanism is IRC section 1014. Assets included in a decedent’s gross estate get a basis step-up to fair market value at death. Sell the inherited asset the next day and the capital gain is close to zero. That is the single most valuable feature in the code for a household that will never owe estate tax.<\/p>\n For seven years the planning reflex was to gift assets out of the estate to beat the exemption sunset. That reflex has a cost. A gifted asset carries the donor’s basis under IRC section 1015. The recipient takes the built-in gain. If the client was never going to owe estate tax anyway, gifting a low-basis asset out of the estate throws away a free step-up to save a transfer tax that would never have applied. That is a straight loss.<\/p>\n So the analysis inverts. For a client comfortably under $30 million as a couple, the question is not how do we get assets out of the estate. It is how do we keep assets in the estate to capture section 1014 at death. Upstream planning, where appreciated assets are directed toward an older-generation relative to catch a step-up, comes back into the conversation. Trust structures drafted for exclusion during the gifting waves may now be working against the family’s income-tax interest.<\/p>\n This is a review market. Every SLAT, every irrevocable trust, every discounted family entity funded between 2018 and 2025 was built for a world where the exemption was about to fall. That world did not arrive. A material share of those structures are now solving a problem the client no longer has, while creating a basis problem the client will actually feel.<\/p>\n Some of those trusts have flexibility built in. Powers of appointment, trust protector provisions, decanting authority under a state statute, formula clauses. Those are the levers to pull to restore basis inclusion where it makes sense. Some trusts were drafted rigid. Those require harder conversations, and possibly judicial or nonjudicial modification proceedings.<\/p>\n I would put trust-review and basis-optimization work at the center of the 2026 marketing plan for any firm that spent the prior years selling exclusion. The same client list that bought the SLAT is the client list that now needs the second look. You already have them. Call them.<\/p>\n Step back from tax entirely. A large portion of estate practice was never about the estate tax. It survives untouched because it answers problems every household has regardless of net worth.<\/p>\n Incapacity planning. Powers of attorney. Health care directives. Revocable living trusts to manage assets if a client loses capacity. None of that keys off section 2010. It keys off aging, illness, and the demographic wave of an older population that needs documents whether the exemption is $7 million or $15 million or a hundred.<\/p>\n Probate avoidance. The revocable trust sold to skip probate is sold on cost, delay, and privacy, not on transfer tax. In states with slow or expensive probate courts, that value proposition holds at every wealth level. A $900,000 estate has the same interest in avoiding an eighteen-month probate as a $9 million one.<\/p>\n Trust administration. This is the recurring-revenue engine that the transfer-tax conversation tends to ignore. Every trust funded during the gifting years now needs administration. Trustee guidance. Annual accountings. Fiduciary income tax coordination. Distribution decisions. Beneficiary disputes. That work does not stop when the exemption goes up. It compounds. The firms that drafted heavily from 2018 through 2025 built themselves an administration backlog that pays out for years.<\/p>\n Fiduciary litigation sits downstream of all of it. More trusts, more trustees, more beneficiaries, more disputes. Trust contests, breach-of-fiduciary-duty claims, accounting challenges. The volume of instruments created in the sunset years feeds this pipeline mechanically.<\/p>\n Charitable planning continues on its own logic. Donors give for reasons that predate any exemption figure, and the income-tax deduction under IRC section 170 drives most lifetime charitable structure regardless of estate exposure. Charitable remainder trusts, donor-advised funds, private foundations. That practice runs on income tax and donor intent, not on section 2010.<\/p>\n So when I map the full practice, the picture is not a shrinking market. It is a rotating one. The transfer-tax slice contracts. The state-tax, basis, administration, incapacity, probate-avoidance, and litigation slices hold or grow. The firm that measured itself only by gifting volume will report a decline that the firm measuring total engagements will not.<\/p>\n Now the operational read, because this is where I actually earn my keep.<\/p>\n First, kill the deadline-driven marketing. It is over. Any campaign built on beat the sunset is dead copy as of July 2025. Firms still running it look uninformed, and clients who read the news know the sunset was cancelled. Replace it with state-tax exposure messaging in the decoupled states and basis-optimization messaging everywhere else.<\/p>\n Second, re-underwrite the client base by state, not by net worth. The old screen was net worth above the federal exemption. The new screen is net worth above the relevant state threshold, which in Oregon means north of $1 million, in Massachusetts north of $2 million, in Washington north of $2.193 million. That reclassification pulls a large group of clients you may have written off as non-taxable back into the active column. It also correctly writes off high-net-worth clients in no-estate-tax states who genuinely have less to do now.<\/p>\n Third, convert the drafting backlog into an administration annuity. The trusts exist. They need trustees who need counsel. Price the administration relationship as recurring rather than as one-off project work. That is the more stable revenue line and it is already sitting in your closed files.<\/p>\n Fourth, staff the basis review. This is net-new work created directly by the reset. Every irrevocable structure funded for exclusion is a candidate for a section 1014 second look. That is a defined, finite, high-value project you can sell to a known list. It has a natural expiration only when the reviews are done, which means a multi-year runway.<\/p>\n Fifth, keep the valuation relationships warm. Connelly<\/em> did not go away because the exemption went up. Business owners still need buy-sell structures that account for the Supreme Court’s 2024 holding, and any transfer of a closely held interest, whether for estate tax, basis, or succession, still needs a defensible appraisal. The appraiser network built during the gifting years is an asset, not a sunk cost.<\/p>\n Sixth, watch section 2704 and the audit posture. The IRS did not withdraw its interest in aggressive valuation discounts. The proposed section 2704 regulations that would have restricted discounts were pulled in 2017, but the audit appetite reflected in Powell<\/em> and Cahill<\/em> is intact. Fewer taxable estates means the Service can concentrate examination resources on the ones that remain. The very large estates still filing Form 706 should expect no less scrutiny, possibly more.<\/p>\n The prevailing take I keep seeing is that a $15 million permanent exemption guts the estate planning practice. That take is wrong, and it is wrong because it confuses one revenue line with the whole business.<\/p>\n What actually happened is narrower and more interesting. Congress removed a deadline that had been doing years of sales work for free. Pub. L. No. 119-21 did not shrink the need for planning. It shrank the need for a specific kind of planning, the exclusion-maximizing, sunset-beating gift, and it did so for a client population that was always small. The firms that will feel real pain are the ones in no-estate-tax states that sold nothing but that product to a handful of very wealthy families.<\/p>\n Everyone else has a rotation, not a recession. The Oregon firm still has a $1 million threshold. The Washington firm still has a 35 percent top rate. The New York firm still has a cliff that punishes a rounding error. The firm anywhere still has clients who will die owning low-basis assets that section 1014 can reprice, trusts that need administration, families that need incapacity documents, and estates that want to skip probate.<\/p>\n I would go further. The reset is good for the health of the practice, because deadline-driven demand is the worst kind. It is lumpy, it front-loads work into a panic window, it rewards speed over craft, and it collapses the day the deadline passes. A practice built on state-tax nuance, basis math, administration relationships, and the ordinary machinery of incapacity and probate is a steadier book than one that lived on a countdown clock.<\/p>\n The clock got unplugged. The good firms already noticed they were never really selling the clock. They were selling the answer to what happens to my family and my money when I am gone, and that question has no expiration date in the code.<\/p>\n","protected":false},"excerpt":{"rendered":" The sunset that drove seven years of gifting is gone. The exemption sits at $15 million from 2026. Here is what that does to the numbers behind estate practices.<\/p>\n","protected":false},"author":1,"featured_media":73,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[11,10],"class_list":["post-10","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industry-data","tag-data","tag-estate-planning"],"yoast_head":"\nthe July reset<\/h2>\n
where the work does not disappear<\/h2>\n
\n
the turn toward basis<\/h2>\n
the work that never depended on the exemption at all<\/h2>\n
how the numbers should reposition a firm<\/h2>\n
my read<\/h2>\n