What the One Big Beautiful Bill Act Means for Estate, Gift, and GST Tax Planning

The One Big Beautiful Bill Act (OBBB) introduces changes to the Estate, Gift and GST exemptions. With these changes, taxpayers should review and consider their existing estate plans and confer with their tax advisors regarding potential modifications and planning opportunities under these new OBBB provisions.

U.S. taxpayers may generally gift assets up to the basic exclusion amount (sometimes also referred to as the “exemption amount”), either during their lifetime or at death, without federal gift tax or estate tax consequences. Assets gifted in excess of the basic exclusion amount are generally taxed at a 40% rate. Any unused basic exclusion amount of a deceased spouse may be transferred to a surviving spouse (which is called “portability”), allowing the surviving spouse to make additional future transfers free of gift and estate taxes. A federal estate tax return (Form 706) is required to transfer a deceased spouse’s unused exemption amount (DSUE) to their surviving spouse.

A separate generation-skipping transfer (GST) tax can be levied to limit multi-generational transfers of wealth. There is also a separate GST exemption, but the GST exemption is not portable between spouses.

The Tax Cuts and Jobs Act (TCJA) of 2017 doubled the exemption amount and indexed annual increases with inflation. In 2025 the basic exclusion amount has increased to $13,990,000 per taxpayer. These amounts, though, were set to sunset at the end of 2025.

The OBBB has permanently increased the exemption to $15,000,000 per taxpayer for decedents dying after December 31, 2025 (which will also be indexed to increase annually for inflation in future years).

 Why You Should Be Considering Estate Planning After the OBBB

Taxpayers should connect with their tax advisors to evaluate their assets and their individual estate plans and trusts with the enactment of the OBBB. Possible discussion points include:

Increased Emphasis on Income Tax Planning with Fewer Taxpayers Subject to Estate, Gift, and GST Taxes

Fewer taxpayers will be subject to federal estate, gift, and GST taxes with the higher permanent exemption amounts under the OBBB. A smaller number of taxpayers would benefit from opportunities with estate tax exempt irrevocable grantor trusts.

For many taxpayers, income tax planning opportunities for a “step-up” in basis for estate property may outweigh the benefits for potential estate tax avoidance. Additionally, the OBBB has increased the benefits of Section 1202 planning with Qualified Small Business Stock for taxpayers owning C corporation stock. The OBBB also provides new opportunities for income tax planning with non-grantor trusts.

Permanency of the OBBB Exemption Amount

Some taxpayers may feel incentivized to attempt to modify or terminate trust structures established for estate and gift tax savings. However, taxpayers should be aware that while the exemption changes are permanent under the OBBB, a future Congress and administration could change these rules and enact a significantly lower exemption amount.

Additionally, Taxpayers should consider the asset protection and succession benefits of trust structures. They should also be advised that no one can 100% guarantee the tax law that will be applicable at their passing.

State Estate Tax Considerations

Taxpayers should also account for any potential state-level estate or inheritance taxes. Separate from the federal estate tax, several states impose an additional state-level estate tax. In several jurisdictions, these state exemptions are much lower than the federal exemption amount.

Currently, 12 states and the District of Columbia impose a separate estate tax, and 5 states impose an inheritance tax. It is critical to ensure your estate plan is appropriately customized to your specific jurisdiction and circumstances.

Increased Importance for Portability Estate Tax Returns

There will be increased importance in filing of portability estate tax returns to transfer a deceased spouse’s exemption (DSUE). If an estate tax return is filed solely for portability purposes, the executor has five years from the decedent’s death to file an estate tax return, per Rev. Proc. 2022-32.

In many cases, there’s continued importance in filing a timely, complete, and properly prepared estate tax return for the first spouse to pass away to take advantage of the substantial benefits of the DSUE amount. Taxpayers should not overlook the benefits of portability of unused exemption.

Why You Should Be Considering Estate Planning After the OBBB

With the enactment of the OBBB, taxpayers are encouraged to revisit their current estate plan considering the new $15 million permanent exemption and other changes. There continues to be important planning considerations for tax savings in this new tax law environment. Taxpayers should take a holistic approach by considering taxes (income, estate, gift, GST) and the appropriateness of prior planning documents.

Each estate has distinct assets and planning objectives, so taxpayers should consult with their professional tax advisors prior to making any changes to their trusts and estate plans. Our Wealth Transition Services team can help you determine what, if any, actions should be taken now to ensure your estate plan aligns with your goals and objectives.