For years, the talk of the retirement planning world was the “2026 Sunset.” Everyone: from tax attorneys in Austin to ranch owners in Fredericksburg: was bracing for the day the federal estate tax exemption would fall off a cliff, potentially leaving families with a massive tax bill they hadn’t seen in a decade.
But here we are in 2026, and the game has changed. Thanks to the "One Big Beautiful Bill Act" passed in late 2025, that "cliff" never happened. In fact, the exemption didn’t go down; it went up. For 2026, the federal estate tax exemption has risen to roughly $15 million per person (and a staggering $30 million for married couples).
So, if the taxes didn't go up, why are we saying old wills are failing?
The truth is, many estate plans drafted between 2017 and 2025 were built specifically to survive a "tax storm" that was cancelled. Because of that, the very language inside your old will or revocable trust: designed to save you money: might now be the thing that causes your family the most headaches.
At Mau Sanchez Capital, we’ve seen how quickly a "standard" plan can become obsolete. Here is why your 2018 or 2022 estate plan might be working against you in 2026.
1. The "Formula Clause" Trap
Many wills and trusts created over the last decade use what’s known as a "formula clause." This was a clever bit of legal drafting designed to automatically put the "maximum amount allowed by law" into a tax-sheltered trust (often called a Bypass or Credit Shelter Trust) upon the death of the first spouse.
Back when the exemption was $5 million or $11 million, this made perfect sense. It protected assets from the IRS while still providing for the surviving spouse.
However, with the 2026 exemption now at $15 million, a will using this "maximum amount" language might accidentally dump your entire estate into a restrictive trust. This could leave a surviving spouse with far less direct access to cash and assets than you ever intended, all to "solve" a federal estate tax problem that, for many families, no longer exists.
2. The "Invisible" Estate Plan: Beneficiary Designations
You could have the most beautifully drafted will in all of Central Texas, but it won’t mean a thing if your beneficiary designations are wrong.
Assets like IRAs, 401(k)s, and life insurance policies don't care what your will says. They follow the names on the "beneficiary" line at the financial institution. In 2026, with new rules regarding Inherited IRA RMDs, an outdated beneficiary designation could force your children to pay significantly higher taxes than necessary.
"A will is only one piece of the puzzle," says Mau Sanchez, owner of Mau Sanchez Capital. "If your financial accounts aren't perfectly aligned with your legal documents, you aren't leaving a legacy: you're leaving a mess for your heirs to clean up."
3. Evolving Family Dynamics
Texas is a land of blended families and ranch-style living, and your estate plan needs to reflect that reality.
A "standard" will often fails to account for:
- Second marriages: Ensuring your current spouse is taken care of while protecting the inheritance of children from a previous marriage.
- Special needs: Providing for grandchildren or children who may require long-term care without disqualifying them from necessary benefits.
- The "Boerne or Fredericksburg" Factor: Many retirees move to the Hill Country and purchase luxury property. If your home is titled incorrectly, it could lead to unnecessary probate costs in a state that: while generally probate-friendly: still requires time and money to navigate.
4. The Shift Toward "Step-Up in Basis"
Because the federal estate tax exemption is so high in 2026, the focus for many retirees has shifted from estate tax to income tax.
When you leave an asset (like a house or a stock portfolio) to an heir at your death, they typically receive a "step-up in basis." This means if you bought a Hill Country ranch for $500,000 and it’s worth $2 million when you pass, your kids can sell it for $2 million and pay zero capital gains tax.
However, if you moved those assets into certain types of irrevocable trusts years ago to "save on estate taxes," you might have accidentally forfeited that "step-up." In 2026, it is often more beneficial to keep assets in your taxable estate to maximize income tax savings for the next generation.
5. Why You Need a Fiduciary Coordinator
At Mau Sanchez Capital, we aren't estate attorneys, and we don’t draft wills. Instead, we act as the "quarterback" for your retirement lifestyle.
We believe that strategic wealth protection requires a collaborative approach. We work alongside your legal and tax professionals to ensure that the portfolio we manage for you is perfectly synchronized with your estate plan.
Whether it's ensuring your asset allocation is appropriate for your trust’s objectives or verifying that your "Transfer on Death" (TOD) instructions are current, we bridge the gap between your daily finances and your long-term legacy.
"True estate planning isn't just about what happens when you die; it's about the peace of mind you have while you're living." : Mau Sanchez
Taking the Next Step
If your will hasn't been reviewed since before 2025, it’s highly likely it contains outdated assumptions. Don't wait for a family crisis to find out your plan is "failing."
Schedule a call with a fiduciary financial advisor today: https://calendly.com/portafoliocapital/15min
To learn more about our approach to fiduciary retirement planning and investment management, visit us at https://portafoliocapital.com/ or give us a call at (512) 593-8380.
Disclaimer:
Portafolio Capital Management dba Mau Sanchez Capital is a Registered Investment Adviser. This content is for informational purposes only and does not constitute investment advice or a solicitation to buy or sell any security. Advisory services are provided only pursuant to a written advisory agreement. Texas Retirement Journal is an educational blog and digital magazine. All fiduciary retirement planning and investment management services are provided exclusively by Mau Sanchez Capital.
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