2026 Estate Tax Sunset: What Attorneys Must Redraft Now

The 2026 estate tax sunset is the kind of event that turns a quiet estate practice into a busy one. The federal estate and gift tax exemption was roughly doubled by the Tax Cuts and Jobs Act, and that increase is scheduled to sunset — cutting the exemption to approximately half its current inflation-adjusted level. Estates that sat comfortably under the elevated exemption can become taxable, and plans drafted around the higher number can behave in ways the client never intended. For estate planning attorneys, this is both a service obligation to existing clients and a real surge of redrafting work. Always confirm the current state of the law before advising — sunset legislation can be extended, modified, or replaced.

Why the sunset matters for drafting

The danger is not only that more estates become taxable. It is that many plans contain formula clauses tied to the exemption amount — language that funds a credit-shelter or bypass trust "up to the maximum amount that can pass free of federal estate tax." When the exemption was high, those formulas behaved one way. When it drops, the same formula can overfund the bypass trust and underfund the marital share, or vice versa, producing a disposition the client never wanted. A plan that was correct when drafted can become wrong by operation of a change in law it silently references.

Which clients to flag for review

• The "in-between" estates. Net worth below the current exemption but above the lower post-sunset figure — newly exposed to estate tax.
• Formula-clause plans. Any plan with exemption-tied funding formulas, disclaimer trusts, or marital-deduction formulas.
• Couples relying on portability. Portability assumptions and DSUE planning should be re-examined against the lower exemption.
• Appreciating-asset owners. Real estate, business interests, and concentrated positions that have grown can push an estate over the line.
• Lifetime-gifting candidates. Clients who could use the elevated exemption before it sunsets, where appropriate and confirmed against current law.

Provisions to redraft

1. Funding formulas. Re-examine pecuniary and fractional formulas that reference the exemption; consider redrafting to fixed amounts or clearer standards where the client's intent is at risk.
2. Bypass / credit-shelter trusts. Confirm the structure still serves the client at the lower exemption, and whether a disclaimer-based or QTIP-based approach better fits.
3. Marital-deduction language. Ensure the marital and non-marital shares fund as intended after the exemption change.
4. Portability elections. Document the strategy and ensure the surviving-spouse plan accounts for DSUE.
5. Irrevocable and gifting structures. Where lifetime gifting is appropriate, draft the vehicles correctly so assets actually leave the taxable estate.

For the structural background, see revocable vs irrevocable trust drafting.

Handling the review wave

The practical challenge is volume. A sunset means re-drafting many plans on a deadline, and editing each document by hand is slow and error-prone. This is where a single-entry data model changes the economics: when the family, fiduciaries, and dispositive scheme live in one place, updating a formula or structure and regenerating the full package is a clean operation, not a manual sweep across six files per client. ContractKit's $49/month flat pricing also scales better across a review push than per-document drafting fees that multiply with volume.

The judgment stays with you — confirming the current law, the client's revised intent, and the tax treatment. The software accelerates the mechanical redraft so you can spend the review wave advising, not retyping.

Frequently asked questions