A major shift in estate and gift tax rules has just taken effect with the enactment of the OBBBA (One Big Beautiful Bill Act), signed by the President on July 4, 2025. This new legislation introduces several long‑awaited changes in federal tax planning. Here’s what you need to know and how it may affect your estate plan.
- Permanent & Increased Estate/Gift Tax Exemptions
Previously scheduled to decrease at the end of 2025, the unified exemption amount from estate and gift tax—currently $13.99 million per individual ($27.98 million per married couple)—is now permanently increased to $15 million per individual ($30 million per married couple) beginning in 2026, and indexed for inflation thereafter. This secures a lifetime allowance for the transfer of wealth that adjusts annually, adding much-needed certainty to long-term planning for clients and advisors. This increase in exemption amount is “permanent” because the law does not include an automatic sunset provision in the future. The increased exemption amounts will therefore remain in place unless a future Congress and President enact and sign future legislation to specifically scale back or change the exclusion amount.
- GST (Generation‑Skipping Transfer) Tax Exemption and Portability Remain Intact
The new law does not change any other provisions of gift, estate and GST tax law. The GST exemption, allowing transfers to grandchildren or more remote descendants without triggering an additional 40% tax, is now also permanently set to the same $15 million amount per individual, and indexed for inflation. The rules for portability elections by surviving spouses also remains unchanged. A surviving spouse may still elect to “port over” any of his or her deceased spouse’s unused estate and gift tax exemption; however, any deceased spouse’s unused lifetime GST exemption still is not “portable” to the surviving spouse.
- Strategic takeaways for Clients
- Use full exemptions: Consider annual gifting or irrevocable vehicles to maximize transfers while exemptions are high and favorable.
- Review dynasty trusts: With the GST exemption secured, multi-generation planning becomes more reliable.
- Stay tax-savvy: Since the exemption amount is indexed annually for inflation, be ready to adjust contribution strategies in the future to take advantage of additional exemption amounts each year.
If you haven’t already arranged a planning session to review your current estate plan, now’s the time. The Diamond Law Firm is ready to guide you through strategic adjustments, ensuring you take full advantage of these new benefits.
