For business owners, wealth rarely sits in a bank account. It is tied up in the company, the building it operates from, and the equipment that keeps it running. That makes the rules for passing wealth to the next generation — the federal estate and gift tax system — one of the most consequential planning topics an owner can ignore. The good news is that recent law gives families more certainty than they have had in years.
This is general information, not individual tax advice — the right treatment depends on your specific situation.
The Lifetime Exemption Just Got Bigger — and Permanent
Every person has a unified lifetime exemption that shelters transfers from both gift tax (during life) and estate tax (at death). For years that figure was scheduled to drop sharply after 2025. The 2025 tax law changed that: beginning in 2026, the basic exclusion amount rises to $15 million per individual — effectively $30 million for a married couple — and the increase was made permanent, with future inflation adjustments. For comparison, the 2025 amount was $13.99 million per person. The looming "cliff" that worried so many families is gone.
The Annual Gift Exclusion Still Does the Heavy Lifting
Separate from the lifetime exemption is the annual gift tax exclusion, which lets you give a set amount to any number of recipients each year with no gift tax and no use of your lifetime exemption. For both 2025 and 2026 that amount is $19,000 per recipient. A married couple can combine their exclusions to give $38,000 per recipient per year. Used consistently across children and grandchildren, annual gifting moves meaningful value out of a taxable estate over time — quietly and without any filing in most cases.
Portability: Don't Waste the First Spouse's Exemption
When one spouse dies, any unused exemption can carry over to the survivor — this is called the deceased spousal unused exclusion, or DSUE, and it is what people mean by "portability." The catch is that it is not automatic. The estate of the first spouse to die must file Form 706, the federal estate tax return, and make the portability election — even when no tax is owed and no return would otherwise be required. Skipping that filing can forfeit millions in future shelter. It is one of the most common and costly oversights we see.
The Step-Up in Basis at Death
Estate planning is not only about estate tax; it is also about income tax for your heirs. When an asset passes at death, its cost basis is generally reset to fair market value as of the date of death — the step-up in basis. If your heirs later sell that appreciated stock, real estate, or business interest, their taxable gain is measured from the stepped-up value, not what you originally paid. For families holding assets that have grown substantially, this single rule can erase a large capital-gains bill — which is why gifting an asset during life is not always smarter than letting it pass at death.
Why Succession Planning Matters for Owners
A closely held business is illiquid, hard to value, and often the family's largest asset — a combination that makes transfers tricky. Even under the higher exemption, owners need to think about how shares move to the next generation, how to fund any tax or buyout without forcing a fire sale, and how to value the company defensibly. Tools such as valuation discounts, buy-sell agreements, and lifetime gifting of minority interests can all play a role. The point of planning is not just minimizing tax — it is making sure the business survives the transition intact.
How VarStan Helps
Estate and gift planning sits at the intersection of tax, valuation, and family goals — exactly the kind of multi-year thinking a CPA-led firm is built for. We help owners understand how the new permanent exemption affects their picture, set up a sensible annual gifting rhythm, make sure a surviving spouse's portability election is actually filed, and coordinate with estate attorneys on the documents that carry it all out. If you are not sure whether your plan still fits the current rules, a short conversation is a good place to start.
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