One Big Beautiful Bill Act estate tax

If you've spent any time researching estate taxes in 2026, you've likely encountered conflicting information — old articles warning about the TCJA sunset, newer ones referencing a massive new exemption, and a general sense that the rules changed recently and significantly. They did. The One Big Beautiful Bill Act resolved one of the most anticipated tax cliff events of the decade, and the result is that the federal estate tax now affects fewer Americans than at any point in modern history. Here's what actually changed, why it matters, and what it means practically for Indiana families settling an estate in 2026.

What the TCJA was going to do

The Tax Cuts and Jobs Act of 2017 doubled the federal estate and gift tax exemption from roughly $5 million (inflation-adjusted) to approximately $11.2 million per person, indexed for inflation. By 2023 the exemption had risen to $12.92 million per individual, or $25.84 million for a married couple.

The catch: these elevated exemption amounts were always set to expire. Under the TCJA's own terms, the exemption was scheduled to "sunset" on January 1, 2026, reverting to the pre-TCJA baseline — roughly $7 million per person in inflation-adjusted dollars. For the past several years, estate planners had been warning high-net-worth families to use their exemption before it shrank.

That sunset did not happen.

What the One Big Beautiful Bill Act actually did

The One Big Beautiful Bill Act, enacted in 2025 and effective January 1, 2026, permanently raised the federal estate, gift, and generation-skipping transfer tax exemption to $15,000,000 per individual. This is not a temporary extension. The OBBBA replaced the expiring TCJA provisions with a new permanent baseline — one that is nearly double what the TCJA provided and more than twice what the pre-TCJA exemption would have been.

For married couples, the effective combined exemption is $30,000,000, because portability remains in place. Portability allows a surviving spouse to claim any unused portion of their deceased spouse's exemption, effectively stacking both exemptions for the second estate to be taxed.

The annual gift exclusion — the amount you can give to any individual in a single year without it counting against your lifetime exemption — is $19,000 per recipient in 2026, indexed for inflation.

The generation-skipping transfer (GST) tax exemption is also $15,000,000 per person. The GST tax applies to transfers made directly to grandchildren or more remote descendants, or to trusts that benefit them, skipping a generation of estate taxation.

How this affects most Indiana estates

Virtually no Indiana family owes federal estate tax in 2026. To trigger it, a decedent would need a gross estate — the total of all assets in their name or control at death — exceeding $15 million. For most Hoosiers, even those with substantial assets by typical standards, this is far beyond reach.

This matters because the federal estate tax was the main reason people heard "estate tax" and got worried. Indiana has no state estate tax and no state inheritance tax — both were fully repealed effective December 31, 2012. So for an Indiana resident dying in 2026, both state and federal estate tax is off the table unless the estate is very large.

What Indiana executors actually need to focus on are the filing obligations that do apply to most estates: the deceased's final Indiana IT-40, the estate's IT-41 fiduciary income tax return, property tax notifications, creditor timelines, and asset transfer procedures. None of these involve estate tax, but all of them have deadlines and consequences if missed.

For a full breakdown of what actually gets filed for an Indiana estate — and which obligations apply to your specific situation — the Indiana Final Tax & Estate Tax Guide covers every return and every deadline in one place.

The unified gift and estate tax: lifetime gifts still matter

The $15 million exemption under OBBBA is unified — it applies across the estate tax and the lifetime gift tax combined. Gifts made during life reduce the exemption available at death. A person who made $5 million in taxable lifetime gifts (above the annual exclusion amounts) enters death with only $10 million of estate tax exemption remaining, not $15 million.

For estates approaching the $15 million threshold, prior taxable gifts need to be counted. Form 709 (the Gift Tax Return) should have been filed in years when taxable gifts were made. Those prior gift amounts must be reported on Form 706 and added back to determine whether the estate tax exemption has been fully consumed.

For the vast majority of Indiana estates, prior taxable gifts are either zero or a small fraction of the exemption. But for families with significant wealth-transfer history, this calculation matters.

Portability and Form 706 when no tax is owed

Portability is one of the more underappreciated features of the current estate tax law. When a spouse dies, any portion of their $15 million exemption that wasn't used — because their estate was smaller than $15 million — can be transferred to the surviving spouse. This effectively gives the surviving spouse up to $30 million of combined exemption when they eventually die.

But portability doesn't happen automatically. The executor of the deceased spouse's estate must file Form 706 and specifically elect portability, even if no estate tax is owed. The 706 must be filed within 9 months of death (or 15 months with an extension).

For Indiana families where the first spouse's estate is under $15 million and no tax is owed, this is a purely administrative filing. But skipping it means the surviving spouse loses the portability benefit permanently — there's no way to reclaim it after the 9-month window closes without a private letter ruling, which is expensive and not guaranteed.

If the combined assets of both spouses are materially below even one $15 million exemption, portability may not be worth the filing cost. But for families with assets in the $5–$15 million range, even filing a simple 706 to preserve portability is good planning.

Generation-skipping transfers and the $15M GST exemption

The OBBBA's $15 million exemption also applies to the generation-skipping transfer tax. The GST tax was designed to prevent families from using trusts to skip estate taxation at the children's generation — passing assets directly to grandchildren and great-grandchildren without a taxable estate at each generation.

For families using dynasty trusts, special irrevocable trusts designed to hold assets across multiple generations, the OBBBA's permanent $15 million GST exemption provides significantly more shelter than prior law. Contributions to dynasty trusts up to the GST exemption can pass to grandchildren and beyond without GST tax.

For most Indiana families, the GST tax is as theoretical as the estate tax — no one in the direct line of inheritance has assets anywhere near these levels. But for those doing multi-generational wealth planning, the OBBBA's changes are meaningful.

What Indiana executors actually need to do

The practical upshot is simple: if the estate is under $15 million, the executor does not file Form 706, does not pay federal estate tax, and does not deal with any estate-tax-related forms or schedules. Full stop.

What the executor does need to handle: the final IT-40 for the deceased, the IT-41 if the estate earned income, property tax auditor notifications, Medicaid recovery if applicable, creditor publication and the 3-month and 9-month windows, pension and benefit notifications, and asset transfers through probate or beneficiary designation. These obligations are independent of estate tax and exist for every Indiana estate regardless of size.

The Indiana Final Tax & Estate Tax Guide focuses on exactly these practical obligations — what every Indiana executor needs to file, notify, and close, without spending time on federal estate tax that doesn't apply to 99% of Indiana estates. It covers the final returns, the fiduciary filing, the property and creditor timelines, and how to close the estate cleanly.

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