2027 Estate and Gift Tax Exemption

The IRS just announced the estate and gift tax limits for 2027. And it’s good news.

The two big ones are: 1) the estate and lifetime gift tax exemption, and 2) the annual gift tax exclusion. Both are going up for 2027.

Background: The One Big Beautiful Bill, passed in 2025, locked in the estate and gift tax exemption at $15 million, indexed for inflation in subsequent years.

2027 is the first year of the indexed increase, and it’s a big one. Starting January 1, 2027, the exemption jumps $480,000 to $15.48 million. As a result, in 2027, you can gift or die with $15.48 million without owing a federal estate or gift tax. For a married couple, it’s doubled to $30.96 million.

And the annual gift tax exclusion is also increasing, from $19,000 to $20,000 per recipient. This is the amount you can gift each year to anyone without using any of your lifetime gift exemption.

The New Estate and Gift Tax Limits for 2027

On November 5, 2026, the IRS announced the inflation adjustments for 2027.

Here are the numbers:

California doesn't have its own estate or gift tax (so far, fingers crossed). Californians generally only have to worry about the federal estate and gift tax.

Most Californians Don't Have an Estate Tax Problem

Suppose you and your spouse own a home worth $1.5 million, have $2 million in retirement and investment accounts, and another $500,000 in other assets.

Your combined estate is worth $4 million. You don't have a federal estate tax problem.

Our clients’ estate values range from $500,000 to $15 million. And even at the upper end, we usually don’t need to implement aggressive estate tax planning. The One Big Beautiful Bill has solved the estate tax issue for most families.

Years ago, when the estate tax exemption was much lower - believe it or not it was only $600,000 in 1996 - married couples commonly included A/B trust provisions in their living trusts and use other sophisticated planning to avoid an estate tax. Today, most California families don't need complicated estate tax planning.

But they still need an estate plan.

The estate tax has nothing to do with probate. California probate is a big deal and a big pain. Don’t think you avoid it because you won’t have an estate tax. California probate costs more than you think. The good news is that it’s easy to avoid probate.

A properly funded living trust avoids probate, provides for managing your assets if you become incapacitated, and makes it easier for your successor trustee to distribute your estate after your death.

What About the $30.96 Million Exemption for Married Couples?

Each spouse has a $15.48 million exemption in 2027. For most families, that is more than enough to cover their estate. A married couple can double that amount because each spouse has the exemption. But to secure both exemptions, the deceased spouse's estate generally must file an IRS Form 706 estate tax return and elect portability. This is called a portability election. It allows the surviving spouse to use the deceased spouse’s unused exemption.

Example: Husband dies in 2027, when the combined estate is worth $10 million. He leaves everything to his wife and has made no prior taxable gifts. His wife’s accountant files Form 706 for his estate to elect portability. By doing so, she locks in her husband’s $15.48 million exemption. When she dies, her family can use her exemption (whatever it is in the year she dies) plus her husband’s ported-over $15.48 million exemption. If his estate doesn’t file Form 706 for portability, her family would only be able to exempt from estate tax the exemption amount on her date of death.

Most families won’t need two exemptions, but if your estate could grow to more than one exemption, then you can hedge your bet by filing the 706.

I've written about this in Should a Spouse in California File Form 706 for Portability?.

You Can Give Away More Than $20,000 Without Paying Gift Tax

Let's say you want to give your daughter $100,000 to help her buy a house.

Can you do that without paying gift tax?

Yes.

In 2027, the first $20,000 is covered by the annual gift tax exclusion. The other $80,000 is applied against your $15.48 million lifetime estate and gift tax exemption.

You generally have to file a federal gift tax return to report the gift. But you don't owe any gift tax.

And assuming you haven't used any of your lifetime exemption before, you still have $15.4 million available.

In the old days, people needed to use their annual gift exclusion to not eat away at their $600,000 exemption. But now that the lifetime estate and gift exemption is over $15 million, the annual gift exclusion is not as important, and it is no longer the limit of what you can gift.

I recently wrote about this in You Can Give Your Kids More Than You Think. The article explains how you can make substantial gifts to your children without paying gift tax.

And if you're wondering when the IRS requires you to report a gift, see Do You Need to File a Gift Tax Return?.

Gifting Now to Help Your Kids Can be Great, But Be Careful with Appreciated Assets

It’s one thing to make cash gifts to your children: to help them buy a home, start a business, pay for college, etc., but think carefully about gifting highly appreciated assets with a low tax basis.

Suppose you bought a rental property for $200,000 that's now worth $800,000. If you give that property to your children, they generally take over your tax basis. When they eventually sell it, they may have a substantial capital gains tax bill.

If they inherit the property when you die, the property's tax basis is generally adjusted to its fair market value at your death. That can eliminate much, if not all, of the capital gains tax.

I've explained how this works in Selling an Inherited California Home.

Questions About Your California Estate Plan?

If you need help with your estate planning, Contact us for a free, 15-minute initial call with one of our attorneys.