Estate Planning Before April 2026: Critical Tax Changes You Can't Afford to Miss
Tax season is coming fast.
And if you're not paying attention, the changes that just took effect on January 1, 2026 could cost you thousands of dollars. Or save you thousands, if you know what to do.
I'm writing this in late January because I've already had three conversations this week with clients in Austin who had no idea that the tax rules changed on New Year's Day. They were planning to file their 2025 returns the same way they always have.
Big mistake.
The One Big Beautiful Bill Act, signed into law in July 2025, rewrote significant portions of the tax code. Some changes are great news. Others will catch people off guard if they don't plan properly.
Here's everything you need to know about estate planning and inheritance tax changes before you file in April 2026, and what you should be doing right now to optimize your situation.
The Good News: Estate Exemption Just Got Permanent (and Bigger)
Let's start with the positive.
For years, wealthy families were stressing about the estate tax "cliff" that was supposed to hit on January 1, 2026. The Tax Cuts and Jobs Act of 2017 had doubled the estate exemption, but that increase was set to expire, dropping the exemption from $13.99 million back down to roughly $7 million per person.
That didn't happen.
The One Big Beautiful Bill Act raised the lifetime estate and gift tax exemption to $15 million per individual ($30 million for married couples) starting January 1, 2026, with annual inflation adjustments thereafter. And unlike the 2017 law, this increase does not have an expiration date.
What this means for you:
If your estate is under $15 million (or $30 million as a couple), you don't owe federal estate tax. Period. The exemption will keep rising with inflation every year starting in 2027.
For families who were rushing to make large gifts before the December 31, 2025 deadline, the pressure is off. Families no longer face a hard deadline that might make them feel forced to rush decisions about gifting large portions of their wealth before the law changes.
But don't assume this means you can ignore estate planning. Just because the federal exemption is higher doesn't mean there aren't other tax traps waiting for you.
What You Need to Do Before Filing Your 2025 Return
1. Review Your 2025 Charitable Giving
This is the big one that's catching people off guard.
Starting January 1, 2026, a new rule takes effect that limits how much of your charitable giving you can deduct if you itemize.
For 2026 and onward, anyone who itemizes and wants to take a deduction for a charitable donation will need to exceed a 0.5% floor before they can claim that donation as an itemized deduction. The 0.5% floor is multiplied by your adjusted gross income (AGI) to determine the portion of your donation that is disallowed.
Here's how it works:
If your AGI is $200,000, the first $1,000 of charitable donations will NOT be deductible. Only amounts above that threshold count.
If your AGI is $300,000, the first $1,500 doesn't count.
If your AGI is $100,000, the first $500 is non-deductible.
Why this matters for your 2025 return:
2025 is the LAST year you can deduct charitable donations without this floor. If you were planning to make charitable gifts in early 2026, consider accelerating them into 2025 to maximize your deduction.
If you typically donate $5,000 per year and your AGI is $200,000, making that donation in December 2025 instead of January 2026 could save you $240 in taxes (assuming a 24% tax bracket).
2. Maximize Your 2025 Annual Gift Exclusion
The United States gift tax annual exemption amount will remain at $19,000 per donee ($38,000 for gifts by a married couple) for 2026.
This is the amount you can give to any individual each year without filing a gift tax return or using any of your lifetime exemption.
If you have multiple children or grandchildren, this adds up fast. A married couple with three adult children and six grandchildren could gift $342,000 in 2025 (9 people x $38,000) without any tax implications or paperwork.
Action item: If you haven't used your full 2025 annual exclusion yet, you still have until you file your return to make those gifts and claim them for the 2025 tax year (consult your CPA on exact timing).
3. File for Portability If Your Spouse Died Recently
This is one of the most overlooked estate planning moves, and it costs surviving spouses millions.
The ability to transfer a decedent's unused federal estate tax exclusion amount to the decedent's surviving spouse by filing a federal estate tax return (referred to as "portability") remains in effect for 2026. The period for a late portability election remains five years after the decedent's death.
Here's what this means in plain English:
If your spouse died and didn't use their full estate exemption, you can claim their unused portion by filing an estate tax return, even if the estate is below the filing threshold.
Let's say your spouse died in 2023 with an estate of $5 million. They had a $12.92 million exemption (the 2023 amount), which means $7.92 million went unused.
If you file for portability, you can add that $7.92 million to your own $15 million exemption, giving you a combined exemption of $22.92 million.
But if you DON'T file, you lose it. Forever.
Action item: If your spouse died within the last five years and you haven't filed for portability, talk to an estate attorney immediately. The deadline is five years from the date of death, and there's no extension.
4. Check Your Retirement Account Beneficiaries
This isn't a new 2026 rule, but it's worth mentioning because it's tax season and people forget.
For non-Roth accounts, the required beginning date for starting RMDs is April 1 of the year after you attain age 73 (if you were born in 1951 or later).
If you turned 73 in 2025, your first Required Minimum Distribution is due by April 1, 2026. Miss that deadline and you'll pay a 25% penalty on the amount you should have withdrawn.
Also, review your beneficiary designations. Retirement accounts pass outside of your will, which means whoever is listed as the beneficiary gets the money, regardless of what your estate plan says.
I've seen too many cases where someone divorced, remarried, updated their will, but forgot to change their IRA beneficiary. The ex-spouse ended up with $500,000 because the beneficiary form was never updated.
Action item: Log into your retirement accounts and confirm your beneficiaries are current. Do this every year at tax time.
5. Understand the New Catch-Up Contribution Rules
Here's a new rule that affects high earners saving for retirement.
For 2026, individuals with earned income greater than $150,000 and who are eligible to make catch-up contributions must make any catch-up contribution to their qualified retirement account (but not IRA) as a Roth contribution.
This means if you're over 50, earn more than $150,000, and want to make catch-up contributions to your 401(k), those contributions MUST go into a Roth account. They won't reduce your taxable income in 2026, but they'll grow tax-free.
Action item: If you're a high earner planning to max out your 401(k), coordinate with your plan administrator to ensure catch-up contributions go into the right account type.
The Charitable Giving Strategy Shift for 2026
Now that we've covered what you need to do before filing your 2025 return, let's talk about how to approach charitable giving going forward.
The new 0.5% AGI floor fundamentally changes the math for donors.
Strategy #1: Bunch Your Donations
Instead of donating $10,000 to charity every year, donate $20,000 every other year. Because the charitable deduction reduction is based on AGI, not the amount of the deduction, you can increase your tax benefit with this strategy (assuming your AGI is steady from year to year).
Here's the math:
If you donate $10,000 per year for two years with an AGI of $400,000:
- Year 1 deduction: $10,000 minus $2,000 (0.5% floor) = $8,000
- Year 2 deduction: $10,000 minus $2,000 = $8,000
- Total deduction over two years: $16,000
If you bunch and donate $20,000 in one year:
- Year 1 deduction: $20,000 minus $2,000 = $18,000
- Year 2 deduction: $0
- Total deduction over two years: $18,000
By bunching, you gained an extra $2,000 in deductions, which at a 24% tax bracket saves you $480.
Strategy #2: Use a Donor-Advised Fund
A donor-advised fund (DAF) lets you make a large charitable contribution in one year, get the immediate tax deduction, and then distribute the funds to charities over multiple years.
For example, you could contribute $50,000 to a DAF in 2026, deduct the full amount (minus the AGI floor), and then grant $10,000 per year to your favorite charities for the next five years.
This is especially powerful for people who have a high-income year (sold a business, exercised stock options, received a bonus) and want to offset that income with charitable deductions.
Strategy #3: Use Qualified Charitable Distributions (QCDs) if You're Over 70½
Taxpayers age 70½ or older might choose to make more qualified charitable distributions (QCDs), which the 0.5% AGI floor rule does not affect.
A QCD allows you to transfer up to $105,000 (in 2024, indexed for inflation) directly from your IRA to a qualified charity. The distribution counts toward your Required Minimum Distribution but is excluded from your taxable income.
This is better than taking the distribution, paying tax on it, and then donating the money, because the QCD never hits your AGI in the first place.
The New Deduction for Non-Itemizers
Here's some good news if you take the standard deduction.
If you take the standard deduction, you can now also deduct up to $1,000 (single filers) or $2,000 (married couples filing jointly) for cash gifts to qualified operating charities, with inflation adjustments.
This is huge for the 90% of taxpayers who don't itemize. You can take the standard deduction AND get a separate deduction for charitable giving.
But there's a catch: this only applies to direct gifts to public charities. Gifts to donor-advised funds or private foundations don't qualify.
Action item: If you take the standard deduction, make sure you're tracking your cash donations to qualified charities. You can now deduct up to $1,000/$2,000 on top of your standard deduction.
High Earners: Watch Out for the Charitable Deduction Cap
If you're in the top tax bracket, there's another limit you need to know about.
A cap also will go into effect on January 1, 2026, on deductions for charitable contributions made by filers in the top United States income tax bracket (37%). Those in the top tax bracket (in 2026, individuals with income over $640,600, or joint filers with income above $768,700) will be limited to tax savings at a computed rate of 35%, rather than 37%.
In practical terms, this means every dollar you donate saves you 35 cents in taxes instead of 37 cents.
It's not a huge difference, but if you're donating $100,000, that's a $2,000 reduction in tax savings.
Action item: If you're in the top tax bracket and planning a major charitable gift, consider whether making that gift in 2025 (before the cap takes effect) would be more beneficial.
State Estate Taxes: Don't Forget About These
The federal estate exemption is now $15 million, but many states have their own estate or inheritance taxes with much lower thresholds.
For those who are New York residents, the New York estate tax exclusion will increase to $7,350,000 on January 1, 2026, however, for those who die with an estate valued at more than 105% of the $7,350,000 exclusion, the New York estate tax will be applied to the full value of the estate, without application of any exclusion. No portability in favor of surviving spouses is allowed.
Other states with estate or inheritance taxes include:
- Connecticut: $13.61 million exemption
- Massachusetts: $2 million exemption (one of the lowest)
- Oregon: $1 million exemption
- Maryland: Has both an estate tax and an inheritance tax
- New Jersey: Inheritance tax only (no estate tax)
If you live in one of these states, or own property in one of these states, your estate might owe state taxes even if it's well below the federal $15 million threshold.
Action item: If you live in a state with estate or inheritance taxes, work with an estate attorney in that state to understand your exposure and planning options.
The Moves You Should Make Right Now
Here's your action checklist for the first quarter of 2026:
Before filing your 2025 return (due April 15, 2026):
- Accelerate any planned 2026 charitable donations into 2025 to avoid the 0.5% AGI floor
- Maximize your 2025 annual gift exclusion ($19,000 per person)
- Review retirement account beneficiaries
- If your spouse died within the last five years, file for portability
- If you turned 73 in 2025, take your first RMD by April 1, 2026
After filing, but before year-end 2026:
- Update your estate plan to reflect the permanent $15 million exemption
- Consider bunching charitable donations for 2027 to maximize deductions
- Explore donor-advised funds if you have a high-income year
- Review your state's estate tax rules if you live in a state with separate estate taxes
- If you're over 70½, consider QCDs for charitable giving
The Bottom Line: Plan Proactively, Not Reactively
The tax landscape changed on January 1, 2026, whether you were paying attention or not.
The good news is that most of these changes are favorable. The estate exemption is higher and permanent. Charitable giving is more accessible for non-itemizers. Portability is still available for surviving spouses.
But there are new traps, too. The charitable deduction floor. The Roth catch-up rule for high earners. The cap on deductions for top earners.
The families who come out ahead are the ones who plan proactively, not the ones who react when their CPA tells them they owe more than expected.
I've been helping clients here in Austin navigate these changes over the past few weeks, and the common thread among the people who are in good shape is simple: they planned ahead.
They didn't wait until March to think about their 2025 return. They didn't assume the rules stayed the same. And they didn't try to DIY complex tax strategies without professional guidance.
If you haven't reviewed your estate plan since 2025, now's the time. If you're sitting on large charitable contributions, bunch them strategically. If your spouse died recently, file for portability.
And if you're not sure where to start, talk to a financial advisor or estate attorney who understands the 2026 tax law changes.
Because the rules just changed. And the people who understand them will save thousands. The people who don't will wish they had.