Key Changes in Estate Planning for 2026 Following IRS Revenue Procedure 2025-32 and Their Implications for High-Net-Worth Clients
- Nevada Legacy Law - Lalaine
- 7 hours ago
- 4 min read
Estate planning is a critical area for individuals seeking to protect their wealth and ensure smooth transfer of assets to future generations. The IRS’s Revenue Procedure 2025-32, released on October 9, 2025, introduces important updates that will shape estate planning strategies in 2026. These changes affect estate, gift, and generation-skipping transfer tax exemptions, as well as gift exclusions, with significant implications for high-net-worth clients.
This post outlines the key updates from the IRS, explains their impact on estate planning, and offers guidance for attorneys advising clients on how to navigate these changes effectively.
Overview of IRS Revenue Procedure 2025-32
The IRS periodically updates tax exemption limits to reflect inflation and policy changes. Revenue Procedure 2025-32 sets the official figures for 2026 regarding estate, gift, and generation-skipping transfer (GST) tax exemptions, as well as annual gift exclusions. These figures are crucial for estate planning because they determine how much wealth can be transferred tax-free.
The key updates include:
Increase in estate, gift, and GST tax exemptions to $15 million per individual.
Annual gift exclusion remains unchanged at $19,000.
Increase in the gift exclusion for transfers to non-citizen spouses to $194,000.
Each of these changes affects how clients can transfer wealth and reduce tax liabilities.
Increase in Estate, Gift, and Generation-Skipping Transfer Tax Exemptions
The most notable update is the rise in the exemption amount to $15 million for 2026. This means individuals can transfer up to $15 million in assets during their lifetime or at death without incurring federal estate or gift taxes. The GST tax exemption, which applies to transfers that skip a generation (such as gifts to grandchildren), also rises to this amount.
What This Means for High-Net-Worth Clients
For clients with estates near or above this threshold, the increase provides a larger tax-free transfer window. For example, a client with an estate valued at $14 million can now transfer the entire amount without estate tax, compared to a lower exemption in previous years.
This change encourages clients to review their estate plans to:
Maximize use of the increased exemption.
Consider gifting strategies to reduce the taxable estate.
Explore trusts and other vehicles that can protect assets and minimize taxes.
Practical Example
A client with a $20 million estate previously faced estate taxes on $5 million (assuming a $15 million exemption). With the exemption now at $15 million, the taxable estate reduces, potentially saving millions in taxes. This allows more wealth to pass to heirs.
Annual Gift Exclusion Remains at $19,000
The annual gift exclusion allows individuals to give up to a certain amount per recipient each year without using any of their lifetime exemption or triggering gift tax. For 2026, this amount remains steady at $19,000.
Implications for Gifting Strategies
While the exemption increased, the unchanged annual exclusion means clients can still gift $19,000 per recipient annually without tax consequences. This exclusion is a valuable tool for reducing the size of an estate over time.
Clients can:
Gift to multiple recipients each year to gradually transfer wealth.
Use the annual exclusion gifts in combination with the increased lifetime exemption for greater tax efficiency.
Increased Gift Exclusion for Non-Citizen Spouses
Gifts to non-citizen spouses have a higher exclusion limit, which rises to $194,000 in 2026. This is significantly higher than the standard annual gift exclusion and reflects the special tax treatment for transfers to spouses who are not U.S. citizens.
Importance for Cross-Border Estate Planning
Clients with non-citizen spouses benefit from this increased exclusion because it allows larger tax-free transfers between spouses. Without this higher limit, gifts to non-citizen spouses could trigger gift tax liabilities.
For example, a client can gift up to $194,000 to a non-citizen spouse without gift tax, compared to $19,000 for other recipients. This helps preserve wealth within the family and supports international estate planning.
Implications for Estate Planning Attorneys
Estate planning attorneys play a vital role in helping clients understand and use these changes to their advantage. The increase in exemptions offers a window of opportunity to reduce estate taxes, but future tax laws may alter these benefits.
Proactive Client Advising
Attorneys should:
Review client estate plans in light of the new exemption amounts.
Discuss gifting strategies that combine annual exclusions and lifetime exemptions.
Consider trusts and other tax-efficient vehicles to protect assets.
Advise clients on the increased exclusion for non-citizen spouses.
Encourage clients to act before potential future tax law changes reduce exemptions.
Example Strategy
An attorney might recommend that a client use the $15 million exemption to fund an irrevocable trust, removing assets from the taxable estate while maintaining some control. At the same time, the client can make annual exclusion gifts to children or grandchildren to reduce estate size gradually.
Conclusion
The IRS Revenue Procedure 2025-32 introduces significant changes for estate planning in 2026. The increase in estate, gift, and GST tax exemptions to $15 million offers high-net-worth clients a larger tax-free transfer window. The unchanged annual gift exclusion of $19,000 continues to support ongoing gifting strategies, while the increased exclusion for gifts to non-citizen spouses at $194,000 benefits families with international ties.
Estate planning attorneys should guide clients to take full advantage of these changes now, as future tax laws may reduce these benefits. By updating plans and employing thoughtful gifting and trust strategies, clients can protect their wealth and minimize tax liabilities effectively.
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