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Estate planning under the $15 million exemption

What the $15 million exemption means, why portability and the basis step-up matter more than ever, and how to use annual gifts and 529 superfunding.

For years, families planned around a scheduled cut in the estate tax exemption. The 2025 law removed that cliff. The exemption is $15 million per person for 2026, indexed for inflation with no scheduled sunset, and it rises to $15.48 million in 2027.

Who still faces estate tax

2026
Basic exclusion per person $15,000,000
Married couple with portability $30,000,000
Top estate and gift tax rate 40%
Annual gift exclusion per recipient $19,000, rising to $20,000 in 2027

Most families won't owe federal estate tax. State planning remains important, because about a dozen states and D.C. still impose estate taxes and a handful more impose inheritance taxes, often at far lower exemptions.

In Connecticut

Connecticut's exemption matches the federal $15 million for 2026, but the tax works differently: a flat 12% above the exemption, a separate state gift tax, a $15 million cap on combined estate and gift tax, and no portability. For a couple above $15 million combined, the lack of portability can make a credit-shelter trust at the first death worth discussing with your attorney, even though federal portability covers the federal tax. Every Connecticut resident's estate also files a state return. When no tax is due, that return is Form CT-706 NT, filed with the Probate Court. Our Connecticut retirement guide covers the state rules.

If you have retired but haven't reached RMD age, Summer Associates can model how different Roth conversion amounts affect your tax and Medicare premiums.The first consultation is free, with no obligation.

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Income tax now matters more for most families

Assets included in your estate receive a step-up in basis: their new basis equals fair market value at death. Highly appreciated stock, real estate, or a family business can therefore pass to heirs with the built-in gain erased, and gifting low-basis assets during life gives up that benefit. Traditional IRAs, 401(k)s, and the deferred gain in annuities get no step-up, so heirs still owe income tax on them.

Portability lets the first spouse's unused exemption pass to the survivor, but only if the executor files Form 706 and elects it. Under simplified relief, estates not otherwise required to file can make the election up to five years after death. The filing is inexpensive insurance even for estates well under the limit.

Key numbers: $15M exemption, $30M per couple · 40% top rate · $19,000 annual exclusion · 529 five-year election of $95,000 per beneficiary, $190,000 per couple.

Gifting tools that still work

  • Annual exclusion gifts of $19,000 per recipient, or $38,000 from a couple.
  • Direct payments of tuition and medical bills, which are unlimited and not counted against the exclusion.
  • 529 superfunding, an election on Form 709 to treat up to five years of exclusion, $95,000 per beneficiary, as made at once. Other gifts to that beneficiary during the five years then use lifetime exemption, and if you die within the five years, part of the contribution returns to your estate.
  • Lifetime gifts of high-growth or high-basis assets, often through trusts, for families above the exemption.

A worked example

A widow with a $9M estate, including $3M of stock with a $400,000 basis, wants to help grandchildren. Rather than giving away the stock and its $2.6M built-in gain, she uses cash to fund $95,000 superfunded 529s for four grandchildren, pays a grandchild's tuition directly, and keeps the stock so it passes with a stepped-up basis. Her late husband's executor elected portability, so her combined exemption covers the estate with room to spare.

Common mistakes

  1. Skipping the Form 706 portability election after the first death.
  2. Gifting low-basis assets to children when the estate is under the exemption.
  3. Keeping outdated trusts that force assets into a bypass trust with no step-up at the second death.
  4. Ignoring state estate taxes and beneficiary designations on IRAs.

How Summer Associates helps

Summer Associates' estate tax team works with your attorney to review trusts and beneficiary designations, files Form 706 portability elections and gift tax returns, and models the basis and income tax impact of each strategy.

This guide is general education based on federal and Connecticut law as of 2026-11-15. State rules differ and facts matter. Before acting, get advice for your situation from Summer Associates or another qualified advisor.

See the tax effect of a Roth conversion, QCD, or gift before you act.

In a consultation, we look at your recent returns and account balances, project your RMDs and Medicare premium tier, and tell you whether a Roth conversion or QCD could lower your federal and Connecticut tax over the next decade.

Book a free consultation or call (203) 327-4311 The first consultation is free, with no obligation.
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