For the first time in years, advisors and clients can plan without wondering what the exemption will be next year. The One Big Beautiful Bill Act settled that question. The federal estate and gift tax exemption is $15 million per individual, $30 million for couples, and, under current law, it’s designed to be permanent.
But permanence doesn’t mean the planning conversation stays the same.
The 2026 numbers create specific opportunities that didn’t exist in 2025, and they shine a different light on where Private Placement Life Insurance (PPLI) fits into wealth planning. That’s especially true for clients approaching the exemption thresholds, facing state-level estate tax exposure, or looking to compound tax-efficiently outside the taxable estate over long time horizons.
Here are five ways the landscape has shifted and what it means for how you think about PPLI.
Important Notes About Illustrations: The growth projections and examples used throughout this article are hypothetical, simplified for illustration purposes, and assume a consistent 6% annual return. These are not offers to sell or solicitations to purchase any insurance product. Actual policy performance will vary based on investment selection, market conditions, fees and expenses, policy design, and individual circumstances. Tax treatment depends on current law and proper policy structuring. Past performance does not guarantee future results. This article is intended for educational purposes only and does not constitute tax, legal, or investment advice. Clients should consult their own advisors before implementing any planning strategies.
The number: The exemption increased by approximately $1.01 million per person from 2025 to 2026. For married couples, that’s roughly $2.02 million of additional lifetime transfer capacity.
Why it matters: This isn’t just “more room.” It’s room that didn’t exist in 2025. Couples who were already using their exemption strategically now have meaningful new capacity to deploy.
The PPLI application: One clean planning approach is for a couple to gift approximately $2 million to an irrevocable trust early in 2026, with that trust funding a PPLI policy. Those dollars can be removed from the taxable estate as soon as the gift is complete, while the policy provides a tax-efficient environment for long-term growth.
Here is a simplified illustration of how that might work. At a 6% annual return, $2 million grows to roughly $6.4 million in 20 years and over $11 million in 30. When properly structured, that compounding occurs inside the policy on a tax-deferred basis, with access typically available through policy loans, subject to policy terms and proper structuring.
The point isn’t the projection but the structural difference: using available exemption to move not only principal, but future appreciation, into a planning vehicle designed to compound outside the estate.
The number: Twelve states plus DC impose their own estate or inheritance taxes. Some thresholds are dramatically lower than the federal exemption. Massachusetts and Oregon begin at $1 million. Illinois is $4 million. Connecticut is $13.6 million.
Why it matters: A client in Massachusetts with a $5 million estate may have no federal exposure, but still face a very real state estate tax issue. In that scenario, the $15 million federal exemption is largely irrelevant to the problem the client actually has.
The PPLI application: In these cases, PPLI often becomes a state planning tool, not only a federal one. When a resident funds a trust-owned PPLI policy, the goal is to remove assets (and their future appreciation) from the state taxable estate as well, subject to proper trust design and state-specific rules.
Consider a Massachusetts client with $4 million ($3 million invested and a $1 million home). They’re roughly $3 million above the state threshold. If $2 million is transferred into a trust-owned PPLI policy, those assets may no longer be part of the taxable estate, and growth over time can potentially be removed from state estate tax exposure as well.
State rules vary and should always be reviewed case-by-case, but for many clients, state thresholds are the benchmark that drives the planning conversation.
The number: The generation-skipping transfer (GST) tax exemption matches the estate and gift tax exemption at $15 million per person.
Why it matters: When exemptions align, dynasty planning can become simpler. A client can fund a GST-exempt trust without the same level of allocation complexity that often accompanies shifting exemption regimes.
The PPLI application: Dynasty trusts and PPLI are natural partners when the objective is multi-generational compounding. A client can allocate GST exemption to a trust that owns a PPLI policy, allowing growth to accumulate over decades in a structure designed to transfer wealth across generations efficiently.
A $10 million contribution growing at 6% doubles roughly every 12 years; $20 million after 12 years, $40 million after 24, $80 million after 36. When structured properly, those values can remain outside estate taxation as benefits move through generations, with policy values generally accessible through loans and death benefits generally paid income tax-free.
This is also where technical governance matters. Investment selection and policy administration must respect investor control requirements to preserve intended tax treatment.
The number: The $15 million exemption is permanent under current law and will be indexed for inflation starting in 2027.
Why it matters: “Permanent” can sound like permission to wait. But in tax law, permanence is political. The same system that created stability can create change, and even if exemptions stay the same, rates can rise or new taxes can emerge.
The PPLI application: For clients who can comfortably use exemption today, doing so can lock in favorable transfers under current law. PPLI can be an efficient way to pair that one-time transfer with a long-term growth structure.
For example, a client gifts $10 million to an irrevocable trust in 2026. Even if future law changes, completed gifts are generally respected. If the trust purchases a PPLI policy and the assets grow over time, that compounding can occur outside the estate.
The leverage here is not complexity. It’s time.
The number: The annual gift tax exclusion is $19,000 per recipient in 2026 ($38,000 for married couples using gift splitting).
Why it matters: The annual exclusion seems small next to a $15 million exemption, but it’s one of the few transfer tools that can be used every year without consuming lifetime exemption.
The PPLI application: Annual exclusion gifting can be paired with trust-owned PPLI to convert consistent, smaller transfers into a single long-term compounding strategy.
A couple with three children and six grandchildren could gift $38,000 to each of nine individuals annually, $342,000 per year, or $3.42 million over ten years. If those gifts flow to a trust that funds a PPLI policy, the structure can accumulate meaningful long-term value in a consolidated, tax-efficient vehicle, rather than dispersing gifts into accounts that may offer less control, less structure, or less long-term planning alignment.
For many families, the annual exclusion becomes the primary transfer strategy. PPLI can give those transfers a long-term framework.
The 2026 landscape is clearer than it has been in years, but clarity doesn’t mean simplicity. PPLI works best when there is meaningful estate tax exposure (federal or state), the planning horizon allows tax-efficient compounding to matter, and the policy is integrated into a broader wealth transfer strategy.
These five shifts are not the conclusion, they’re entry points into a better conversation. The real work happens in coordinated planning across attorneys, CPAs, investment advisors, and insurance specialists, especially when investor control and policy administration are critical to maintaining favorable treatment.
One final reminder: Gifts exceeding the annual exclusion generally require filing Form 709 by April 15 of the following year, and state rules can meaningfully impact planning outcomes.
For more on investor control requirements and PPLI applications, see our previous articles on the Investor Control Doctrine and how PPLI is used in practice. If you'd like to explore how PPLI can complement a specific client situation, or how it fits alongside other planning strategies like charitable planning, we're here to continue the conversation.
This article is intended for educational purposes only and does not constitute tax, legal, or investment advice. Clients should consult their own advisors before implementing any planning strategies.
