📅 2026 Update: Key Changes in Estate Planning

Since the original article on estate planning, several important updates have taken place. The landscape of wills, trusts, and estate taxes has changed, affecting how individuals plan for the future. The details below highlight these significant changes, while the rest of the article provides further insights into estate planning practices.

🏦 Estate Tax Exemption Increase

The federal estate and gift tax exemption has increased to $15 million per individual, effective January 1, 2026. This change comes from the One Big Beautiful Bill Act, signed into law on July 4, 2025. This permanent exemption allows individuals to pass on substantial wealth without incurring federal estate taxes, making estate planning more favorable for many.

📜 Inherited IRA Required Minimum Distribution Penalties

Starting in 2025, beneficiaries of inherited IRAs must comply with new rules regarding required minimum distributions (RMDs). If they miss taking these distributions, they will face a 25% excise tax on the amount not withdrawn. However, if they correct the error in a timely manner, the penalty is reduced to 10%.

Understanding these rules is crucial to avoid costly penalties.

🏦 Integration of Estate Planning into Banking

In October 2026, startup Prismm launched a service that integrates beneficiary and estate planning tools directly into bank accounts. This innovation aims to simplify how individuals transfer assets to heirs. By embedding these tools in everyday banking, it may become easier for users to manage their estate planning needs.

⏳ Probate Costs and Duration

Probate costs typically range from 3% to 7% of the estate's total value. For example, on a $500,000 estate, this would amount to between $15,000 and $35,000. Additionally, probate can take several months to a few years, depending on the estate's complexity and local laws.

Understanding these costs and timelines can help in planning effectively.

📌 Key Points Summary

  • $15 million estate tax exemption is now permanent.
  • Inherited IRA RMD penalties of 25% for missed distributions.
  • Prismm's integration of estate planning tools into banking.
  • Probate costs range from 3% to 7% of estate value.
  • Probate duration varies based on estate complexity.

💡 Tips for Estate Planning

Reviewing your situation with an attorney is essential for effective estate planning.

📄 Understand the Estate Tax Exemption

With the estate tax exemption now set at $15 million per individual, it's vital to understand how this can affect your estate planning strategy. This exemption allows you to pass on a significant amount of wealth without incurring federal taxes.

⏰ Stay On Top of Inherited IRA RMDs

If you are a beneficiary of an inherited IRA, be aware of the RMD requirements. Ensure you take your annual distributions on time to avoid hefty penalties, which can be as high as 25% for missed RMDs.

🏦 Consider Digital Estate Planning Options

Explore digital estate planning services like Prismm. These services are designed to simplify the process of transferring assets to heirs, making estate planning more accessible.

🔍 Evaluate Probate Costs

When planning your estate, factor in the costs associated with probate. With typical costs ranging from 3% to 7%, it's important to choose your estate strategies wisely to minimize these expenses.

📑 File Form 706 When Necessary

If you are a surviving spouse wanting to claim the deceased spouse's unused exclusion amount, make sure to file Form 706 within the required timeline. This is necessary even if you do not owe estate taxes.

🏛️ Be Aware of State-Specific Laws

Remember that state estate tax laws can vary significantly. Some states impose their own estate or inheritance taxes with different exemptions and rates, so it's important to understand your local laws.

❓ Frequently Asked Questions

🤔 What happens if I miss my inherited IRA RMD deadline?

If you miss your inherited IRA RMD deadline, you may face a 25% excise tax on the amount not withdrawn. However, if you correct the issue in time, the penalty could drop to 10%.

🏷️ How do I file Form 706?

To file Form 706, you must complete the necessary sections and submit it within 9 months after the decedent's death. If needed, you can request a 6-month extension.

📊 What are common probate costs?

Probate costs typically range from 3% to 7% of the estate's total value. For a $500,000 estate, this translates to between $15,000 and $35,000 in probate fees.

🏠 Can estate planning help avoid probate?

Effective estate planning can minimize probate costs and streamline the transfer of assets, ensuring they are passed on according to the decedent's wishes.

🔄 How does the estate tax exemption affect my estate plan?

The $15 million estate tax exemption allows individuals to transfer significant wealth without incurring federal estate taxes, making it a crucial factor in estate planning strategies.

📅 How often should I update my estate plan?

It is recommended to review and update your estate plan regularly, especially after major life events such as marriage, divorce, or the birth of a child.

⚖️ Recent Court Cases

There have been recent court rulings relevant to estate planning and tax laws. These rulings can impact how estates are managed and how tax laws are applied.

For more recent rulings, feel free to browse more rulings on the news page.

End of October 2026 Update






 



What is the inheritance cycle?



The inheritance cycle is the process by which the heir apparent receives his or her entitled share of the inheritance. There is no will and the amount of the estate exceeds the debts and liens against it. This inheritance is determined at the time of the decedent’s death and is not defined in a will or other arrangement. These individuals are beneficiaries, not heirs. 

Inheritance Cycle


What is the difference between estate tax and inheritance tax?



An estate tax is assessed on the estate as a whole and the inheritance tax will be assessed on the share of property gained by the individual from the state. Some states will have both an estate and inheritance tax and some states have done away with these taxes all together. The federal government currently taxes all estates valued over $5 million. Gains from estates accrued by spouses and charities are not subject to these taxes 



What are states that impose inheritance or estate taxes?



• Indiana



• Iowa – inheritance tax is the recipient is not a direct descendant



• Kentucky – inheritance and estate tax depending on the descendant with less direct relatives paying a higher rate. • Maryland



• Nebraska



• New Jersey



• Oklahoma



• Pennsylvania – there is a flat tax estate tax rate. Transfers to grandparents, parents, or lineal descendants are taxed at 4.5%. Transfers to siblings are taxed at 12%. Transfers to any other persons are taxed at 15%. 



• Tennessee



What are the criticisms of the inheritance cycle?



The very existence of estate taxes are due to the notion that wealth is transferred from generation to generation, leading to the rapid accrual of wealth and provides the generation receiving the inheritance with the opportunity to become more socially and economically mobile. Due to federal estate tax exemptions, most Americans will not pay estate taxes and these taxes are intended to cut into the transfer of wealth for “old money” families. Critics of estate taxes claim that the taxation of valuable estates prevents individuals from investing more heavily as well as providing an incentive to conceal assets.