Should the 2026 Midterm Sweep Change Your Estate Plan?
A Democratic Congress could target the $15 million estate tax exemption or the step-up in basis at death. Here is how wealthy families should prepare.
Whenever control of Congress shifts in Washington, wealthy families and financial advisers inevitably ask the same high-stakes question: Is it time to rewrite our financial playbook?
With Democrats winning control in the midterm elections, it's not a bad idea for high-net-worth households to rethink some of their tax strategies. But does that mean you need to completely change your estate plan? Not necessarily.
There's no need to panic
It's natural to be concerned about the midterm election results, says T.L. Turnipseed, head of personal trusts at Alta Trust Company. But he doesn't think there's a reason to be alarmed.
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As a quick refresher, current law puts the estate tax exemption at $15 million per person, or up to $30 million for a married couple. The exemption, Turnipseed says, is indexed for inflation and carries no built-in expiration date.
However, Turnipseed warns, Congress can change these "permanent" tax codes.
"The election itself changes nothing," he says, "but a Congress controlled by the other party could lead to exemptions being revisited."
"Families with estates well above the exemption should treat a reduction as a scenario to prepare for." — T.L. Turnipseed
Kelsey Simasko, attorney at Simasko Law, isn't particularly worried about near-term estate tax changes.
"A study by the Pew Research Center shows that the 2025 to 2026 congressional session was one of the least productive sessions in terms of laws passed in the last 40 years," she says. "As a citizen, I would hope this new Congress can rally and become more productive, but I do not think that as a body it will, which means a change in the estate tax exemption is unlikely."
That said, Simasko insists that it's never a bad idea to review your estate plan to ensure that it's flexible.
"But I wouldn’t lose any sleep over this," she says.
Moreover, while a Democratic Congress will set the legislative agenda, hold hearings, and introduce tax bills, such changes cannot become law without a presidential signature or a bipartisan compromise. Given Trump's promise to use his veto power, wealthy families probably won't need to make significant changes before 2028.
What could realistically change?
1. Lower estate tax exemptions
Tax policy is always subject to future congressional legislation. Turnipseed thinks that if a change were to occur, a lower estate tax exemption would be the most likely outcome.
As he points out, a prior proposal would have reduced the estate tax exemption to $3.5 million per person and the lifetime gift exemption to $1 million, with a top rate of 65% on very high-net-worth estates.
"We could see a return to the inflation-adjusted pre-2018 level, roughly half of today's exemption," he says. However, Turnipseed notes, "for most families, even that would not matter."
2. Additional taxes on trusts
Turnipseed also points out that a Senate bill introduced in May proposes an annual levy on very large trusts beginning in 2027, at marginal rates of 1% to 3%, with credits against later estate and generation-skipping transfer taxes. Similar proposals could increasingly pop up in a Democratic-controlled Senate, but that doesn't mean every proposal will get signed into law.
3. Changes to appreciated assets at death
Al Kingan, JD, an estate and business planning executive with MassMutual, cautions that Congress could also revisit the income-tax treatment of appreciated assets at death.
Under current federal tax law, when someone dies and leaves appreciated assets, such as stocks or real estate, to an heir, the asset's tax basis automatically steps up to its fair market value on the date of death. Congress could vote to eliminate the step-up in basis, or tax unrealized gains at death rather than waiting for an heir to sell.
Should your plans change?
If you have a solid estate plan in place, Turnipseed says, the midterms are simply a reason to prepare for the future, not to panic.
"Families well above the exemption should review trust terms, liquidity, tax basis, and valuations now, and complete gifts only when the plan fits their financial needs," he says. "Everyone else should check the formula provisions in their existing documents so that a change in the exemption, in either direction, doesn't defeat the plan the family intended."
Simasko feels similarly.
"Instead of worrying about an improbable decrease in the estate tax exemption, folks need to ensure they are engaging in adequate tax planning to withdraw funds from their retirement accounts when they are of eligible age," she says.
As Simasko explains, qualified retirement plans do not receive a step-up in basis; heirs must pay ordinary income tax on distributions, even if the estate as a whole owes no federal estate tax.
"If you die and your children inherit your [IRA or 401(k)], they generally have 10 years to withdraw the entire account balance and are required to pay income taxes on the withdrawals," she says.
"A retired person is [generally in] a lower income bracket than their children who are working full time, and likely at the height of their income potential. The retired person should withdraw as much money as possible during their lifetime and pay the taxes on it instead of passing the account onto their children to pay higher taxes on the withdrawals."
However, because high-net-worth retirees are often in top tax brackets throughout retirement, large lump-sum withdrawals could trigger an unnecessary tax hit. In those cases, advisers typically recommend strategic partial Roth conversions to manage the family's blended lifetime tax rate.
Simasko recommends putting withdrawn funds into vehicles like CDs, savings accounts, bonds, and brokerage accounts. These non-qualified assets avoid the post-death ordinary income tax trap posed by traditional IRAs, and eligible capital assets get a step-up in basis.
Kingan agrees.
"Families whose net worth is approaching or exceeds the exemption should review their plans now, particularly if they own rapidly appreciating businesses, investments, or real estate," he says. "Lifetime gifting may be appropriate when the family has sufficient remaining resources."
All told, though, the takeaway is to review plans carefully but not jump to conclusions or immediate changes. Just as importantly, stay on top of tax changes as they arise so you're not left scrambling.
"Planning is much easier when it is deliberate rather than rushed," Kingan insists.
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