What Does the One Big Beautiful Bill Act Mean for Your Estate Plan? - Trusts & Estates and Elder Law Newsletter
After a close vote in both the House of Representatives and the Senate, the United States Congress recently passed the One Big Beautiful Bill Act ("OBBBA") into law.
What does the OBBBA mean for your estate plan?
Federal estate, gift, and generation skipping transfer taxes are imposed at a rate of forty (40%) percent. Beginning in 2026, the estate and gift tax exemption will be increased from $13.99 million per individual to $15 million per individual and $30 million for married couples, with the exemption amount to be adjusted annually for inflation. The Generation Skipping Tax exemption is also increased to $15 million per person. There is no longer a “sunset clause” to end this federal exemption amount (as there was with the prior legislation), which means that Congress intends for the federal exemption amount to continue to increase each year, indefinitely, unless or until the law is changed.
What does this mean practically in 2026?
- If an individual dies and leaves an estate worth $15 million or less (assuming no lifetime taxable gifts have been made), such individual’s estate will not be subject to federal estate tax. Additionally, when a surviving spouse dies and leaves an estate worth $30 million or less (again, assuming no lifetime taxable gifts have been made, and the deceased spouse’s exemption was properly preserved with a timely portability filing), such surviving spouse’s estate will not be subject to the federal estate tax.
- The $15 million dollar lifetime exemption continues to apply to both gift tax and estate tax, combined. Accordingly, every individual can gift up to $15 million throughout his or her lifetime without having to pay gift tax. However, to the extent the exemption is used during life, it reduces the available estate tax exemption on death.
- Grandparents may gift up to $15 million directly to their grandchildren, or indirectly through trusts that will benefit their grandchildren, without triggering generation skipping transfer tax.
What should you do now?
While the federal estate and gift tax exemption is historically high and is currently “indefinite,” nothing in the Tax Code is beyond change. Especially in the current polarized political climate, a new Congress, even in the near future, could significantly diminish the federal estate and gift tax exemption to its pre-2017 levels of $5.49 million dollars (to be adjusted for inflation) per individual, or abolish the exemption altogether. Additionally, the OBBBA has no impact on state inheritance and estate taxes which thus continue to apply.
Consequently, the same traditional, safe, and tried-and-tested estate planning advice remains:
Despite these increased federal exemption amounts, gifting assets during your lifetime and creating a variety of irrevocable trusts, such as Dynastic Trusts, Spousal Lifetime Access Trusts, and Irrevocable Life Insurance Trusts for your family, and Charitable Remainder or Charitable Lead Trusts for charitable causes, among other estate planning strategies, may still be advisable. As before, it remains prudent to transfer wealth to future generations in a thoughtful and estate tax efficient manner.
All things considered, a larger exemption does not replace the need for a sound estate plan—it simply expands your planning opportunities.
Federal and state estate and inheritance taxes can be complex. The Trusts & Estates attorneys at Pashman Stein Walder Hayden P.C. can help guide you through these recent changes and how it may impact your planning.
Learn more about our Trust & Estates and Elder Law & Special Needs Planning Practices.
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The information contained herein is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to these materials do not create an attorney-client relationship between Pashman Stein Walder Hayden P.C. and/or its attorneys, and the reader of the materials.
