The $13.61M Estate Tax Exemption Expires in 2026: What South Florida High-Net-Worth Families Must Do Now

The clock is ticking. The Tax Cuts and Jobs Act (TCJA) doubled the federal estate tax exemption in 2018 — from roughly $5.5 million to over $11 million per individual. Today it stands at $13.61 million per person ($27.22 million for married couples). But that doubled exemption expires on January 1, 2026.

Unless Congress acts, the exemption drops to approximately $7 million per individual. For high-net-worth families in Fort Lauderdale, Boca Raton, Miami, and Palm Beach — many of whom moved to Florida specifically for tax advantages — this sunset could trigger $2.6 million or more in additional estate taxes.

The Math: What the Sunset Costs You

Estate Value	Tax Under Current Law	Tax After Sunset	Additional Tax
$15 million	$556,000	$3,200,000	$2,644,000
$20 million	$2,556,000	$5,200,000	$2,644,000
$30 million	$6,556,000	$9,200,000	$2,644,000
$50 million	$14,556,000	$17,200,000	$2,644,000

The additional tax is roughly $2.64 million per individual regardless of estate size above the threshold — because the lost exemption ($6.6M) × 40% tax rate = $2.64M.

The Anti-Clawback Rule: Use It or Lose It

The IRS confirmed in Treasury Decision 9884 that gifts made under the higher exemption will not be clawed back after the sunset. This means if you gift $12 million in 2025 using your current $13.61M exemption, and the exemption drops to $7M in 2026, the IRS will not retroactively tax the difference.

This is the single most important reason to act now. Every dollar of exemption you use before the sunset is permanently locked in.

Strategy 1: Spousal Lifetime Access Trust (SLAT)

The most popular strategy for married couples who want to use their exemption but aren't ready to "give away" their wealth:

• Spouse A creates an irrevocable trust for the benefit of Spouse B (and children)
• Fund the trust with $13.61M using the lifetime gift tax exemption
• Spouse B can receive distributions from the trust — maintaining access to the funds
• Assets are out of both spouses' estates for estate tax purposes
• Both spouses can create reciprocal SLATs (with differences to avoid the reciprocal trust doctrine)

A married couple can move $27.22 million out of their estates while maintaining indirect access through SLAT distributions. After the sunset, this opportunity shrinks by $13.2 million.

Strategy 2: Dynasty Trust

For families focused on multi-generational wealth preservation:

• Fund an irrevocable dynasty trust using GST exemption ($13.61M per individual)
• Trust lasts for generations — or perpetually in states like South Dakota, Nevada, or Florida (360 years)
• Assets grow outside every future generation's taxable estate
• Beneficiaries receive distributions but assets remain protected from creditors, divorce, and estate tax

Florida allows dynasty trusts to last 360 years under its vesting statute. For South Florida families, this means wealth preservation for 10+ generations without leaving the state.

Strategy 3: Grantor Retained Annuity Trust (GRAT)

Best for transferring appreciating assets with minimal or zero gift tax:

• Transfer assets (business interests, stock, real estate) to a GRAT
• Set annuity payments so the taxable gift value is near zero ("zeroed-out GRAT")
• If assets outperform the IRS hurdle rate (§7520 rate), the excess passes to beneficiaries tax-free
• Current §7520 rate makes GRATs less efficient, but they still work for high-growth assets

Strategy 4: Irrevocable Life Insurance Trust (ILIT)

Life insurance proceeds are income-tax-free (§101) but included in your estate if you own the policy (§2042). An ILIT solves this:

• ILIT purchases or owns the life insurance policy
• Annual premium payments funded through annual exclusion gifts ($18,000 per beneficiary using Crummey powers)
• At death, proceeds are both income-tax-free AND estate-tax-free
• ILIT proceeds can fund estate tax liability so heirs don't need to liquidate assets

For a $5M policy in your estate at a 40% rate, that's $2M in estate tax your family avoids by having the ILIT own the policy instead.

Strategy 5: Family Limited Partnership (FLP) Gifting

For families with significant real estate or business holdings in South Florida:

• Transfer real estate portfolio or business interests into FLP/LLC
• Gift limited partnership interests to children or trusts
• LP interests receive valuation discounts of 25–40% (lack of control + lack of marketability)
• $10M in real estate → gift LP interests at $6–7.5M valuation → $2.5–4M transferred "free"

Combined with the current higher exemption, FLP discounting can move substantially more wealth out of your estate before the sunset.

Strategy 6: Annual Exclusion Gifting (Accelerated)

The annual gift exclusion ($18,000 per recipient, $36,000 for married couples) doesn't count against your lifetime exemption. Maximize it:

• 4 children + 4 spouses + 8 grandchildren = 16 recipients
• $36,000 × 16 = $576,000/year out of estate
• 529 plan superfunding: 5-year election allows $90K/$180K per beneficiary in a single year
• Direct payments for tuition and medical expenses (unlimited, doesn't count against any exclusion)

Why Florida Families Have an Extra Advantage

• No state estate tax — Florida repealed its estate tax. New York exempts only $6.94M, Massachusetts only $2M
• No state income tax — Trust income from a Florida situs trust avoids state income tax
• Strong asset protection laws — Florida's homestead exemption, tenancy by the entireties, and trust protections are among the strongest in the nation
• Long dynasty trust duration — 360 years under Florida law
• Directed trust statute — Allows separation of investment, distribution, and administrative trustee functions

The Timeline: What to Do and When

When	Action
Now – June 2025	Meet with estate planning attorney. Get current estate valued. Identify strategies.
June – September 2025	Draft trust documents (SLAT, dynasty trust, ILIT). Obtain appraisals for FLP interests.
September – November 2025	Execute gifts. Fund trusts. Complete FLP transfers. File gift tax returns.
December 2025	Final deadline. All transfers must be completed before January 1, 2026.
April 2026	File Form 709 (gift tax return) reporting 2025 gifts.

Important: Complex trusts take 3–6 months to properly draft, review, and execute. The legal and appraisal bottleneck is real — estate attorneys across South Florida are already seeing increased demand. Do not wait until Q4 2025.

What Happens If Congress Extends the Exemption?

If Congress extends the higher exemption (or makes it permanent), the gifts you've already made are simply locked in and you've used exemption that would have been available anyway. There is no downside to acting early — the anti-clawback rule protects you regardless.

If Congress does nothing, the exemption drops and families who planned ahead save millions. Those who waited pay the tax.

The worst outcome is waiting and losing $2.6 million per individual in exemption capacity.

Ready to see how the estate tax sunset affects your specific situation? Run your free tax assessment — it takes less than 2 minutes and maps your exposure to the 2026 changes.

Related Reading

• 2026 Tax Changes Every Florida High Earner Should Prepare For
• Entity Structuring for Florida Business Owners
• Charitable Giving Tax Strategies in South Florida