On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) marked another considerable turning point in estate and gift tax planning. Beginning January 1, 2026, the federal estate, gift, and GST tax exemptions will permanently increase to $15 million per person, or $30 million per couple. These amounts will be indexed for inflation starting in 2027, using 2025 as the base year.
This change not only locked in the doubled pre-2018 exemption levels but also enhanced these historically high thresholds. For families looking to transfer wealth efficiently, there may not be a better time than the present.
Key Changes Under OBBBA
Provision | 2025 (Pre-OBBBA) | 2026+ (OBBBA) |
Unified Estate & Gift Exemption | $13.99M* per person (indexed for inflation) | $15M per person (indexed for inflation beginning 2027) |
Generation Skipping Transfer (GST) Exemption | $13.99M* per person (indexed for inflation) | $15M per person (matches unified) |
*Prior to the OBBBA, the federal Estate, Gift, and GST tax exemptions were scheduled to revert to $5 million per person (adjusted for inflation) after December 31, 2025.
OBBBA left many core planning techniques untouched. Effective strategies such as grantor trusts, Grantor Retained Annuity Trusts (GRATs), valuation discounts, and annual exclusion gifts remain viable planning options. Families that act now can shield significant assets from future estate taxation.
Planning Opportunities to Consider
Now is an ideal time to review your estate plan and consider updates that align with your wealth transfer goals:
- Update Wills and Trusts: Ensure formula clauses reflect the new exemption and avoid unintended results. Build in flexibility for future changes in law or family needs.
- Use the Full $15M Exemption: Utilize various planning strategies to remove appreciating assets from your estate to maximize tax savings.
- Employ Estate-Freeze Techniques: Transfer or sell assets to grantor trusts to “freeze” the asset value and shift future growth out of your estate.
- Utilize Valuation Discounts: Continue using discounts when transferring interests in family businesses or entities.
- Plan for State-Level Taxes: Evaluate trust situs or state-level QTIP elections, especially in high-tax states like Oregon and Washington.
- Consider the Use of Non–Grantor Trusts: The OBBBA’s temporary increase in the State and Local Tax (SALT) deduction cap creates an opportunity for high-income earners to utilize non-grantor trusts as a planning tool to achieve income tax savings that may be unavailable at the individual level due to the phase-down provisions for higher earners. While trusts are subject to SALT deduction limits, each non-grantor trust is treated as a separate taxpayer, potentially allowing for multiple SALT deductions across multiple trusts.
- Weigh Basis vs. Exclusion: With higher federal exemptions, it may be advantageous to keep low-basis assets until death for a step-up in basis.
Your strategy should align with how much wealth you wish to transfer and over what time frame. Acting now—while exemptions are high, and planning tools remain intact—can ensure that you are able to reach your personal goals.
Frequently Asked Questions
Q: Will my gifts be taxed later if the exemption drops?
A: No. Treasury regulations confirm there will be no “claw-back.” Gifts made under the $15M exemption will remain protected.
Q: Can I still use valuation discounts?
A: Yes. OBBBA did not change the rules for lack-of-control or lack-of-marketability discounts.
Q: Do I need to update my estate documents?
A: Possibly. Documents that use old exemption figures or outdated tax provisions should be reviewed.
Q: How does this affect GST planning?
A: Positively. The higher GST exemption allows for larger transfers to multigenerational trusts without incurring GST tax.
Q: Are annual exclusion gifts and 529 super funding still allowed?
A: Yes. The $19,000 annual gift exclusion and the ability to front-load 529 contributions remain available.
Q: What strategy is right for me?
A: It depends on your goals, assets, and family dynamics. An integrated plan involving your CPA, attorney, and advisor is often the most effective.
Final Thoughts
Whether your goals are modest or multigenerational, this is a unique time to act. Thoughtful planning today can help secure your legacy and avoid surprises tomorrow.
As tax policy changes, it is more important than ever to consider how income tax planning and estate tax planning work together. We are here to help you explore your options and implement a plan that reflects your values and priorities.
Disclosure: This article is for informational purposes only and does not constitute legal or tax advice. Please consult your professional advisors before taking action.
