By: Dr. Tamara Patzer
In brief: The federal basic exclusion amount is $15,000,000 per person for people who die in 2026, and an estimated $124 trillion is expected to pass between generations through 2048. This feature explains why founders with illiquid companies can face a taxable estate, why a plan can fail even when the money is sufficient, and what a New Orleans tax attorney says to settle early.
Fifteen million dollars sounds like more than most owners will ever need to worry about. For a founder whose company is the largest asset, it can be reached quickly and without anyone feeling rich. New Orleans tax and estate attorney Todd M. Villarrubia, author of Entrepreneurial B.E.A.S.T. Mode™, argues that the gap between how wealthy an owner feels and what an estate return will say is where plans most often fail.
What is the federal estate tax exclusion in 2026?
For people who die in 2026, the federal basic exclusion amount is $15,000,000 per person, according to the IRS1. Value above the exclusion can be subject to federal estate tax unless the plan addresses it.
The number is federal, and it applies to the total of what a person owns, not only to cash. A business, real estate, investments and many other assets all count toward it. State rules differ and are not covered here, and Congress can change the figure.
How can a founder with modest cash have a taxable estate?
Because value and liquidity are different. Take a company valued at $40 million. The owner may draw a normal salary, drive an ordinary car and keep a few months of cash in the bank. The estate is still far past $15,000,000 on paper.
Villarrubia describes the structure of that problem in his book: “Most of their balance sheet is illiquid and concentrated in a single asset: their company.” An estate with that profile can owe tax on value that cannot be turned into cash without selling the business, often in a hurry and at a disadvantage.
The book’s answer is not a single device. It is a habit of looking at the whole balance sheet early, and of asking what would happen to it on the day it passed to someone else.
Is the top 1% the same group as the people who face estate tax?
Not exactly. The top 1% of filers by income, which reached about $676,000 of adjusted gross income in tax year 2023, according to the Tax Foundation4, is defined by a year of income. Estate exposure is defined by net worth at death. The Federal Reserve estimates that the top 1% held about $60.3 trillion in net worth in the second quarter of 20263. Some owners are in both groups, and some are in one.
A founder might never report $676,000 in a year and still hold a company that pushes the estate over the exclusion. Another might have a very high income and spend most of it. Both the flow and the stock count, and Villarrubia’s rule of thumb is that neither alone tells you whether you are safe: “having a high income and high net worth in no way secures your future”.
Why does a plan fail even when the money is there?
Because of what surrounds the money. Villarrubia is blunt about it: “Your heirs inherit only a fraction of your intended legacy, not because the wealth was insufficient, but because the planning was absent.”
He lists the usual causes in his book: documents that conflict with one another, advisers who never speak, a family that was never told the reasons behind the plan, and a business with no one prepared to run it. In one line, he adds that “estate documents don’t prevent family disputes; they merely provide something to fight over.” A legal document is only one piece of the plan.
He adds a practical constraint: “The IRS doesn’t negotiate, creditors don’t wait, and family conflict doesn’t pause for grief.” A plan that has not been put in place beforehand gets drafted under the worst conditions.
How big is the transfer ahead?
Very. Cerulli puts the total moving between generations through 2048 at $124 trillion: about $105 trillion for heirs and $18 trillion for charity2. A good share of that will arrive in the form of closely held businesses and real estate, not brokerage accounts, which is why liquidity and structure are the practical questions for owners.
Villarrubia’s observation about those transfers is the one that gives the book its tone: “Money changing hands means nothing if stewardship doesn’t change with it.” The tax is only one of the ways a transfer goes wrong. The others are conflict, confusion and a succession that nobody prepared.
What should an owner settle early?
Four things come up in almost every conversation:
- A current list of everything owned and how each item is held.
- A rough view of how much of the total could be turned into cash quickly, and how much could not.
- A named successor or a plan for who decides if the owner cannot.
- A schedule for checking the plan against current law, since the exclusion and the rules around it can change.
Whether the owner is inside the highest-earning tier matters less than whether the plan matches the balance sheet. A family that wants to keep a business through a transition has to decide who will run it and how the tax will be paid before anything happens.
What should an owner below the exclusion take from this?
That the number is a starting point and not a verdict. An estate below the federal exclusion may still face state rules, family disputes and liquidity problems that have nothing to do with the federal figure. Use the exclusion to ask a question, not to close a topic. Ask whether your documents match your intentions, whether the people named are still the right ones and whether your family knows where to look.
Common questions
Is the exclusion per couple or per person? The IRS figure is per person, $15,000,000 for 20261. How married couples use it is a matter for a licensed attorney.
Does a business owner need a trust? Sometimes, and sometimes not. It depends on the assets, the family and the state, and it should be decided with a licensed attorney and a tax professional.
What happens if the plan is not updated? It can drift out of line with the law, the family and the business. The better habit is to check the plan on a schedule so it stays in step.
Sources
- Internal Revenue Service, What’s New: Estate and Gift Tax
- NAPA-Net, Wealth Transfers Expected to Hit $124 Trillion Through 2048 (reporting Cerulli)
- Federal Reserve Distributional Financial Accounts, Net Worth Held by the Top 1% (FRED)
- Tax Foundation, Who Pays Federal Income Taxes? Tax Year 2023
About the author. Dr. Tamara Patzer is a publisher and former newspaper editor. She was on the staff of The Charlotte Sun when it was named a 2005 Pulitzer Prize finalist for its Hurricane Charley coverage.
About the source. Todd M. Villarrubia is an attorney with an LL.M. in Taxation and a Juris Doctorate. He is an Accredited Estate Planner, a Board Certified Expert in Estate Planning and Administration, and a Fiduciary Investment Advisor Representative. He is the author of Entrepreneurial B.E.A.S.T. Mode™. Wealth Planning Law Group, 101 W. Robert E. Lee Blvd., Ste 404, New Orleans, LA 70124. Phone: 504-982-8207; email: todd@lawealthplan.com; website: https://lawealthplan.com/?utm_source=newsanchored&utm_medium=wall-street-times&utm_campaign=top-1pct
Disclaimer: Sponsored feature written on behalf of Todd M. Villarrubia. This article is general information, not legal or tax advice, and reading it does not create an attorney-client relationship. Results vary.
