Estate Planning News Roundup: May 2026 — What Law Firms Need to Know Right Now

If you've been heads-down drafting plans and funding trusts, here's a fast pass through the estate planning news 2026 developments that are already reshaping client conversations. From a permanently higher federal exemption to formula clause traps and state-level tax shifts, the next few months will generate real work — and real risk — for firms that aren't current.

The $15 Million Federal Exemption Is Now Permanent

The biggest estate planning news of the year landed on July 4, 2025, when the One Big Beautiful Bill Act (OBBBA) was signed into law. The TCJA's enhanced estate and gift tax exemption — which had been scheduled to sunset at the end of 2025 back to roughly $7 million per person — was instead made permanent and raised. Beginning January 1, 2026, the federal unified estate and gift tax exemption is $15 million per individual, or $30 million for married couples using portability. Starting in 2027, the amount will be indexed for inflation.

The practical effect: the "use it or lose it" urgency that drove a surge of gifting and trust-funding activity in late 2024 and early 2025 no longer applies in the same way. Clients who made substantial gifts to SLATs, dynasty trusts, or other irrevocable structures before the prior deadline should review those structures now that the exemption landscape has shifted. Clients who held off can still pursue tax-efficient planning — just without the prior time pressure.

What hasn't changed: the gap between the federal exemption ($15 million) and many state-level exemptions (as low as $1 million in Oregon) means state estate tax planning remains critically important for clients with multistate assets or property in high-tax jurisdictions.

Your Clients' Old Formula Clauses May Be Misfiring

This item deserves a dedicated client alert or review queue.

Many wills and revocable trusts drafted under the TCJA — or even earlier — contain formula clauses that fund a credit shelter (bypass) trust "up to the available federal exemption" at death, with the remainder passing outright or into a marital trust. Under a $5–7 million exemption, this formula worked predictably. Under a $15 million exemption, it can produce unintended results.

The problem: a formula clause that sweeps the full exemption into the bypass trust can unintentionally overfund that trust and underfund — or entirely eliminate — the marital share. This is particularly harmful when the bypass trust is structured to avoid a basis step-up at the surviving spouse's later death. Locking in carryover basis on $15 million in appreciated assets is a significant tax cost, and clients who originally signed these plans had no idea this outcome was possible.

For law firms, any client plan containing a formula funding clause should be flagged for review. Disclaimer-based plans, QTIPable marital trusts with elective treatment, and carefully drafted powers of appointment are the tools practitioners are using to build in post-mortem flexibility. This is a document-review-and-amendment situation — not a passive wait-and-see.

One note worth keeping in mind: once those amendments are signed — updated credit shelter provisions, revised trustee instructions, new beneficiary designations — they need to be funded correctly. An amended plan with stale title and outdated designations is still an unfunded plan.

Washington State Rolls Back Its Top Estate Tax Rate

Washington's estate tax made news earlier this year when Governor Ferguson signed legislation rolling back the state's top rate. Washington had temporarily raised its top marginal rate to 35% — the highest in the country — but that rate applied only through June 30, 2026. Effective July 1, 2026, Washington's estate tax reverts to its previous top rate of 20%.

Washington still imposes an estate tax on estates exceeding $2.2 million, and the 20% top rate will remain the highest in the country (tied with Hawaii). Clients with Washington real property or domicile should understand that this is a rate reduction, not an exemption increase. The $2.2 million threshold is unchanged.

For firms managing Washington estates or advising clients who own property in the state, the rollback is a welcome development — but it does not eliminate the planning gap between Washington's exemption and the federal level. Structures designed to reduce Washington estate tax exposure remain relevant.

Oregon's Estate Tax Is Heading to the Ballot

Oregon currently imposes a state estate tax on estates exceeding $1 million — a threshold that hasn't changed since 2011, despite significant inflation over that period. The top marginal rate runs to 16% on larger estates. An initiative petition is actively seeking to place a measure on Oregon's November 2026 ballot that would repeal the state estate tax in full.

The outcome is uncertain, but the trajectory is worth monitoring. If Oregon's estate tax is repealed, planning strategies specifically structured to reduce Oregon exposure — including irrevocable trusts designed to remove assets from the taxable estate before death — may need to be revisited in the context of clients' current plans.

Separately, legislative proposals in Salem earlier this year sought to raise Oregon's $1 million exemption, though those efforts have not advanced to passage. Practitioners advising clients with Oregon property or Oregon domicile should track both the legislative and ballot-initiative tracks as the November election approaches.

Trust Funding Volume Is Rising — Is Your Firm Ready?

A consistent theme running through the 2026 estate planning news cycle: the field is growing. A recent industry survey found that 53% of firms already offering trust and estate planning services plan to expand their offerings this year, with the figure rising to 66% among firms managing more than $500 million in assets.

The drivers are straightforward. A higher federal exemption makes trust planning accessible to a broader client base. Post-OBBBA document reviews are generating amendments that in turn create new funding needs. The persistent state-level planning gap keeps irrevocable structures in play for a wide swath of clients. All of this points in the same direction: more trusts drafted and executed this year, which means more funding work — deed transfers, account retitling, beneficiary designation updates — flowing to estate planning staff.

The question is not whether the volume is coming. It is whether your firm has the infrastructure to handle it without absorbing the cost in unbilled staff hours.

Key Takeaways

• The One Big Beautiful Bill Act permanently raised the federal estate and gift tax exemption to $15 million per person effective January 1, 2026, with no sunset provision. The prior TCJA sunset is off the table.
• Formula clauses in older wills and revocable trusts can unintentionally overfund a bypass trust under the higher exemption, creating carryover-basis problems — these documents need active review and possible amendment.
• Washington's estate tax top rate dropped from 35% to 20% effective July 1, 2026; the $2.2 million exemption threshold is unchanged.
• An Oregon ballot initiative could repeal the state's entire estate tax in November 2026; outcome is uncertain but worth tracking for clients with Oregon property.
• Trust funding volume is increasing across the industry — more plans drafted means more funding execution work, and firms without an efficient process will absorb that cost invisibly.