What the New $15MM Estate Tax Exemption Means If You Hold Concentrated Stock

July 7, 2026

If you’re an executive sitting on a large position in your company’s stock, the One Big Beautiful Bill (OBBBA) just changed one of the variables in your hold-vs.-sell decision.

Here’s what happened, what it actually means, and what questions you should be asking right now.

Estate tax exemption 2026 concentrated stock — executive reviewing estate plan with employer stock holdings at sunset

What Changed

Effective 2026, the federal estate and gift tax exemption is permanently set at $15 million per person or $30 million per married couple with portability. It adjusts for inflation beginning in 2027.

This is a meaningful shift from the prior $13.99 million exemption, and more importantly, it’s permanent. The uncertainty about whether the TCJA exemptions would sunset (which drove a lot of planning activity over the past several years) is gone.

For context: under pre-OBBBA law, an executive with $10 million in appreciated employer stock could have a legitimate estate tax problem at death. Now, that same executive is almost certainly under the threshold, even accounting for other assets.

The Tempting Conclusion

Here’s the logic a lot of executives are going to reach, consciously or not:

If my estate is under $15 million, the step-up in basis at death eliminates my embedded capital gains. So why sell now, pay California income tax and realize the gain when I could just hold, pass the stock to my heirs, and wipe out the tax liability entirely?

It’s a coherent argument. And the exemption increase does genuinely strengthen it for executives who were previously in estate tax territory.

But it’s only one variable in a much more complicated equation.

What Didn’t Change

Concentration risk. Your stock can drop 40% in a quarter, and often does. The history of executive equity compensation is full of people who held through one bad earnings call, an SEC investigation, a broader sector selloff, or a CEO transition — and watched a retirement-defining position shrink to something much less meaningful. The step-up in basis is worth nothing if the stock isn’t worth much at death.

California income tax. If you live in California and eventually sell, whether you or your heirs do it, the state takes their share of the gain. California doesn’t have a separate capital gains rate; it’s taxed as ordinary income. Heirs who inherit stepped-up shares avoid federal capital gains tax on appreciation up to the date of death, but any growth after they inherit is fully taxable when they sell. The exemption doesn’t change California’s cut.

Sequence-of-returns risk. If a large portion of your liquid net worth is tied to a single stock, your retirement income and lifestyle are exposed to that stock’s volatility at exactly the wrong time. A sharp decline in the three to five years before or after you stop working can permanently impair your financial security in ways that are hard to recover from.

The illiquidity trap. Concentrated positions feel liquid until they aren’t. Blackout periods, Rule 144 volume limits, and 10b5-1 plan mechanics can all constrain when and how fast you can actually sell. That’s fine if you’re in no rush — but it becomes a real problem if circumstances change quickly.

What This Means for Existing Planning

For executives who have already done sophisticated estate planning around a concentrated position, the OBBBA requires a review.

If you have used a Grantor Retained Annuity Trust (GRAT), an irrevocable life insurance trust (ILIT), or a spousal lifetime access trust (SLAT) specifically to move appreciated employer stock out of your taxable estate, that strategy may no longer be necessary given the higher exemption. More importantly, some of those structures may now be working against you.

Here’s the specific risk: if stock held in an irrevocable trust doesn’t get a step-up in basis at your death (which it generally doesn’t, because it’s out of your estate), your heirs may face a significant capital gains bill on appreciation that could have been wiped out if the stock had stayed in your estate. Now that most executives are under the $15 million threshold, the trade-off that made those structures sensible may have flipped.

This new dynamic is worth a direct conversation with your estate planning attorney and your advisor.

So How Should You Actually Think About This?

The step-up in basis argument makes the most sense when three things are true at once: your estate stays under $15 million, the stock holds its value until you die, and your heirs sell it soon after they inherit it. All three have to go right.

The sell-and-diversify argument makes more sense when any of the following apply: the stock is already a large chunk of what you own, you’re getting closer to retirement and starting to depend on this money, or you’re not confident the company will be in a stronger position five or ten years from now than it is today.

For most executives in the $2–10 million range, estate tax was rarely the reason to hold. The real reason people hold concentrated stock is a combination of conviction in the company, inertia, and not wanting to avoid a larger tax bill.

What to Do Now

If you have a concentrated employer stock position and you’ve been waiting for clarity before making a move, there is greater certainty regarding the federal estate tax exemption. The exemption is $15 million, it’s permanent, and estate planning for many executives may become simpler.

That doesn’t mean the hold-vs.-sell question got simpler. It means one obstacle got removed.

This is exactly the kind of moment where a fresh look at your full picture makes sense: what you hold, when you need it, how much risk you’re carrying, and what a thoughtful diversification plan looks like over the next three to five years.

If you want to run through your own scenario with an experienced advisor, contact Spectrum Asset Management to schedule a conversation.

Disclaimer: This material is for informational and educational purposes only and should not be construed as personalized investment, legal, or tax advice, or as a recommendation of any specific security or strategy. All investing involves risk, including the potential loss of principal. Tax rules and estimated payment requirements vary by individual situation; consult your CPA and financial advisors regarding your personal circumstances. Nothing herein constitutes an offer to enter into an advisory relationship. Spectrum Asset Management, Inc. (SAM) is an SEC-registered investment adviser headquartered in Newport Beach, California. SAM is not affiliated with any other firm using a similar name.

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