2027 Estate and Gift Tax Changes: What Families Need to Know About the New Federal Exemptions

Did you know that the federal estate and gift tax exemptions are increasing again in 2027, creating additional opportunities for families to transfer wealth while minimizing potential estate taxes?

For individuals and married couples with substantial assets, understanding the latest federal estate and gift tax exemptions is an important part of protecting family wealth and developing an effective estate plan. The Internal Revenue Service (IRS) has announced inflation adjustments for 2027 that increase the amount individuals can transfer during their lifetime or at death without incurring federal estate or gift taxes. These changes also affect annual gifting strategies, generation-skipping trusts, and education savings plans.

Whether your estate is worth $5 million, $15 million, or $30 million or more, these updated figures provide an opportunity to review your estate planning strategies.

What Is the Federal Estate Tax Exemption for 2027?

The federal estate and gift tax exemption will increase from $15 million per individual in 2026 to $15.48 million in 2027. For married couples, this means a combined federal estate tax exemption of approximately $30.96 million, assuming both spouses' exemptions are fully available and properly utilized. This represents an increase of $480,000 per individual, or $960,000 for married couples, compared to 2026.

The federal estate tax generally applies at a maximum rate of 40% to taxable estates exceeding the available exemption. Consequently, the increased exemption could provide meaningful tax savings for families with larger estates.

For example, a married couple with a $25 million estate may currently fall below the combined federal estate tax exemption. However, continued appreciation in real estate, investments, retirement accounts, or business interests could eventually push their estate above the exemption.

Estate planning is not just about what your assets are worth today. It is also about what they may be worth when they pass to your beneficiaries.

2027 Federal Estate and Gift Tax Numbers at a Glance

The following table compares the key federal estate and gift tax figures for 2026 and 2027.

These figures create several opportunities for families to transfer wealth more efficiently.

Annual Gift Tax Exclusion Increases to $20,000

Beginning January 1, 2027, individuals can give up to $20,000 per recipient annually without using their lifetime gift tax exemption. Married couples can generally combine their annual exclusions to give $40,000 per recipient.

For example, a married couple with three adult children could transfer $120,000 annually to their children without reducing their lifetime exemptions, provided the gifts qualify for the annual exclusion. Over ten years, that represents $1.2 million transferred out of their estate, excluding any future appreciation on those gifted assets.

For families with substantial wealth, annual gifting can be particularly effective when combined with irrevocable trusts designed to provide creditor protection and preserve assets for future generations. However, gifts to trusts must satisfy specific requirements to qualify for the annual exclusion. Additionally, gift splitting may require filing federal gift tax returns even when no gift tax is owed.

Generation-Skipping Transfer Tax Exemption Also Increases

The generation-skipping transfer (GST) tax exemption will also increase to $15.48 million per individual in 2027. This exemption is especially important for families who want to preserve wealth for grandchildren and future generations.

Through properly structured dynasty trusts or other multigenerational planning strategies, families may be able to transfer substantial assets into trusts that benefit children, grandchildren, and more remote descendants while minimizing additional estate and GST taxes.

Importantly, the GST exemption is separate from the estate and gift tax exemption, and GST exemption portability is not available between spouses. Because of this, careful allocation of the GST exemption is essential when establishing and funding these trusts.

529 College Savings Plans: Increased Superfunding Opportunities

Families interested in helping children or grandchildren pay for education will have additional gifting opportunities in 2027. Under special five-year election rules, an individual may contribute up to $100,000 to a beneficiary's 529 college savings plan in 2027 and elect to spread that contribution over five years for federal gift tax purposes. Married couples may potentially contribute $200,000 per beneficiary using both spouses' annual exclusions.

This strategy allows families to accelerate education funding while removing assets and their potential future growth from their taxable estates. However, additional gifts to the same beneficiary during the five-year period may have gift tax consequences, and special rules apply if the donor dies before the five-year period ends.

Special Gift Tax Exclusion for Noncitizen Spouses

For 2027, the annual exclusion for qualifying gifts to a spouse who is not a U.S. citizen increases to $201,000, compared with $194,000 in 2026. Unlike gifts between spouses who are both U.S. citizens, gifts to noncitizen spouses generally do not qualify for the unlimited marital deduction.

Families with international estate planning considerations should carefully evaluate these limitations, particularly when significant assets or cross-border ownership structures are involved and special planning in a couple’s revocable trust may be necessary.

Why California Families Should Review Their Estate Plans in 2027

Although California does not currently impose a separate state estate or inheritance tax, California residents with significant wealth remain subject to federal estate and gift tax rules. For married couples with estates approaching or exceeding $15 million, strategies such as Spousal Lifetime Access Trusts (SLATs), Irrevocable Life Insurance Trusts (ILITs), dynasty trusts for children or grandchildren, and other advanced planning techniques may help reduce future estate tax exposure.

Even families whose estates currently fall below the federal exemption should consider future asset appreciation, changing family circumstances, and the importance of properly structured trusts. The increased federal exemptions provide another opportunity to review existing estate plans and consider whether additional lifetime gifting or advanced trust planning makes sense.

At Geiger Law Office, P.C., we help individuals and families explore sophisticated estate planning strategies designed to protect wealth and accomplish their long-term goals.

If you own substantial or highly appreciated assets, we invite you to contact our office to schedule a consultation at (760) 448-2220 or at https://www.geigerlawoffice.com/contact.cfm to explore whether advanced estate planning strategies may be appropriate for your estate plan.