2026 Midterm Election: What It Could Mean for Your Estate Plan and Inheritance

Whether you’re planning to distribute your estate or stand to inherit different assets, the midterm election may influence which tax proposals advance in Congress and, ultimately, how much wealth gets taxed and distributed to heirs or beneficiaries. Republican lawmakers have proposed eliminating the federal estate tax, while Democrats have introduced measures to tax certain large trusts and limit strategies that wealthy families use to transfer assets. Here’s a comparison of each party’s plans, how they measure up against current rules and what needs to happen before your estate plan or inheritance could change.

A financial advisor can help you see how your estate plan would hold up if the estate tax were repealed or the exemption dropped.

What Democratic Lawmakers Are Proposing

Senate Democrats have targeted trusts that keep wealth within families for generations. Senator Patty Murray of Washington introduced the Fair Trusts for Fiscal Responsibility Act of 2026 in May, co-led by Senator Ron Wyden of Oregon and co-sponsored by Senators Chris Van Hollen, Cory Booker and Angela Alsobrooks. ¹

The bill would impose an annual withholding charge on trusts with assets above $50 million beginning in 2027. The proposal also includes some dynasty trusts that are used for passing wealth to multiple generations while potentially reducing or delaying transfer taxes. Those payments would generally count as a credit toward any estate tax owed later. ² Charitable and employee benefit trusts would be exempt. The bill would also treat income tax that a grantor pays on a trust’s behalf as a taxable gift.

The proposed marginal rates range from 1% on holdings between $50 million and $100 million to 3% above $1 billion, with intermediate brackets of 1.5% and 2%. Rules for allocating thresholds among trusts with shared beneficiaries could affect the calculation. For wealthy families, these annual charges may reduce funds available for investment or inheritance, although credits would generally offset future estate tax liabilities.

Wyden and Senator Angus King of Maine also introduced the Getting Rid of Abusive Trusts Act in April. ³ The bill would restrict the use of grantor retained annuity trusts (GRATs), which can allow owners to pass investment gains to heirs with little or no gift tax.

The proposal would require GRATs to last at least 15 years, with a maximum term based on the annuitant’s life expectancy plus 10 years. It would also set a minimum taxable value for assets passing to heirs and treat certain income taxes paid by the grantor as gifts. These rules would limit the use of short-term GRATs to transfer investment gains with little or no gift tax.

Other Democratic lawmakers have proposed taxes on large fortunes. Senator Elizabeth Warren’s Ultra-Millionaire Tax Act would impose an annual 2% tax on net worth above $50 million, plus another 1% on amounts exceeding $1 billion. ⁴ Unlike the estate tax, the proposed wealth tax would apply each year during a person’s lifetime. For example, someone with $100 million in taxable net worth would owe $1 million annually ($100 million − $50 million) × 2%.

Senator Bernie Sanders of Vermont has also proposed lowering the federal estate tax exemption to $3.5 million per person, with rates reaching 65% on amounts above $1 billion. ⁵ His “For the 99.5 Percent Act” has not become law and does not represent a unified Democratic position.

The change could bring more families with valuable property, businesses or investments into the estate tax system. For example, a $5 million estate with no deductions or prior taxable gifts would owe nothing under the 2026 exemption of $15 million per person. Under Sanders’ plan, the estimated bill would be $675,000 ($5 million − $3.5 million) × 45%.

Democrats have also sought to change how inherited investment gains are taxed. Van Hollen’s 2021 Sensible Taxation and Equity Promotion (STEP) Act would tax unrealized appreciation at death, subject to a $1 million exclusion and other protections. This proposal targets gains that could otherwise escape income tax through the stepped-up basis. ⁶

The table below compares the five proposals and the tax changes each would make if enacted:

A Democratic majority in Congress could give these proposals more attention in committee hearings and budget talks. Each is a separate bill, though, and lawmakers who back one won’t necessarily support the others.

What Republican Lawmakers Are Proposing

Republicans enter the midterm elections having already reshaped estate tax rules. The One Big Beautiful Bill Act (OBBBA), which President Trump signed on July 4, 2025, raised the federal estate tax exemption to $15 million per person for 2026 and adjusts it for inflation in later years.

Now, the party wants to go further by eliminating the federal estate tax entirely. Senate Majority Leader John Thune of South Dakota and other Republican senators introduced the Death Tax Repeal Act in February 2025, with a companion bill in the House. ⁷ The legislation would also repeal the generation-skipping transfer tax.

This tax can apply to assets passed to grandchildren or other beneficiaries who qualify as “skip persons” under federal tax rules. This includes certain relatives from two or more later generations and unrelated people who are more than 37.5 years younger than the giver. ⁸

Under the proposal, inherited assets generally would continue to receive a step-up in basis. This tax rule typically adjusts an inherited asset’s tax basis to its fair market value as of the owner’s date of death. The federal gift tax would also remain, but its top rate would fall from 40% to 35%.

As a result, heirs who receive assets eligible for a step-up in basis generally would avoid capital gains tax on appreciation before the owner’s death. Any gains after inheritance would remain taxable when the assets are sold.

The table below compares current federal tax rules with the changes proposed in the Death Tax Repeal Act:

If Republicans keep control of Congress, they might try to repeal the estate tax through a standalone bill or include that change in a larger tax package. Lawmakers may also decide to keep the estate tax with today’s higher exemption instead. That’s what happened in 2025, when the tax law raised the exemption to $15 million for 2026 but left the estate tax in place.

How Current Legislation Compares With Party Proposals

If you’re watching the midterm elections to decide whether to adjust your estate plan or inheritance strategy, keep in mind that neither party’s estate tax proposals have become law. Today’s rules still determine how much of an estate is taxed and what can get passed on to heirs.

Comparing those rules with each party’s plans could help you understand what’s at stake for you and your potential beneficiaries. The table shows how current law compares with the main Democratic and Republican proposals:

Winning the midterms alone would not change estate tax law. Both chambers of Congress must pass the same bill before sending it to the president for a signature. Overriding a presidential veto requires a two-thirds vote in each chamber. ⁹

With President Trump in office until January 2029, Democrats could advance proposals through Congress but face a potential veto. Republicans would have a clearer path to his signature, though Senate rules could still block repeal.

Most legislation needs 60 Senate votes to overcome a filibuster. Qualifying tax measures can pass through budget reconciliation with a simple majority, subject to procedural restrictions. ¹⁰

Until Congress acts, you can plan around the $15 million exemption and other current rules while testing how a lower exemption, taxable gains at death or annual trust charges would affect your estate.

Bottom Line

The 2026 midterm elections could influence whether Congress pursues higher taxes on large estates and trusts, or moves to repeal the federal estate tax. None of these proposals would take effect without new legislation. For now, the $15 million federal exemption remains in place, and reviewing how the proposed changes could affect your assets and beneficiaries can help you decide whether your estate plan needs adjustments.

Estate Planning Tips

• A financial advisor can help you decide whether to gift assets, set up a trust or wait for Congress to act before making changes to your estate plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• If you’re considering handling your estate plan on your own, review these DIY estate planning pitfalls before drafting any documents.

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