The start of the new year is an ideal time to review your current estate plan or to create an estate plan for the first time. January brings updated exemption amounts, inflation adjustments, and, in some years, new regulatory guidance that can affect planning strategies. This year presents some timely opportunities to implement strategic gifting and position one’s wealth for tax efficiency.
Increased Exemption Amounts for Estate, Gift, and Generation-Skipping Transfer Tax
In 2026, the estate, gift, and generation-skipping transfer tax exemption increased to $15,000,000 per person, offering an additional $1,010,000 of tax-free gifting capacity. For those who have already used a portion of their exemption, this additional exemption amount opens the door to further strategies, whether that means gifting equity in a family business, shifting appreciation potential out of your estate through growth stock transfer, or helping children and grandchildren with down payments for their homes.
Annual Gift Tax Exclusion – $19,000 Per Person
The 2026 annual gift tax exclusion remains at $19,000 per person. This allows a person to give up to $19,000 per individual recipient and not be required to file gift tax return.
Beyond writing checks directly to children or grandchildren, the annual gift tax exclusion can be deployed in a few creative ways:
- 529 Education Savings Plan: Contributions to a 529 plan are eligible for the annual gift tax exclusion. For those that are looking to make a larger immediate impact, 529 plans permit a single contribution of up to $95,000 per beneficiary (or $190,000 for married couples) that can be treated as if the contribution was made evenly over five years. This election is made by filing a gift tax return for the year of the contribution and allows the donor to apply the annual gift tax exclusion to the entire contribution up to $95,000. This election provides the option for significant funding upfront without consuming additional gift tax exemption or filing a gift tax return for the subsequent four years. However, if additional gifts are made to the same beneficiary during those subsequent years, the donor will be required to file a gift tax return to report those gifts and to report that year’s portion of the election amount.
- Direct Tuition Payments: Payments that are made directly to an educational institution for tuition—not room and board, books, or other fees—are exempt from gift tax and do not count against the annual exclusion. This allows grandparents or other family members to support private school, college, or other graduate education without using their lifetime gift tax exemption.
- Irrevocable Trusts with Crummey Powers: Annual exclusion gifts can also be directed into irrevocable trusts that are designed to hold and manage assets for future generations. When structured with proper withdrawal rights, these gifts qualify for the annual exclusion while keeping the assets protected, invested, and outside of the beneficiaries’ taxable estates.
Washington Estate Tax Updates
Effective as of July 1, 2025, the following changes were made to the Washington estate tax: (1) the exemption increased to $3,000,000 annually, indexed for inflation starting January 1, 2026, and (2) the tax rates for a taxable estate increased. The inflation adjustment takes effect as of January 1, 2026, based on the most recent October consumer price index. Currently, the estate tax exemption amount is $3,076,000 based on the August consumer price index. The Washington Department of Revenue has reserved the right to adjust the 2026 estate tax exemption amount when the October consumer price index is released. These changes are significant, and each tax bracket has a progressively higher threshold and effective rate. There is a modest increase of a few percent at the lower end, and up to an additional 15% on estates worth more than $9,000,000 above the exemption amount.
