On July 4, 2025, the One Big Beautiful Bill Act became law (Public Law 119-21) and introduced a number of permanent and temporary changes with meaningful implications for estate planning.
Key Highlights for Estate and Gift Planning
- Permanent increase in exemptions. Beginning January 1, 2026, the estate, gift, and generation-skipping transfer (GST) tax exemptions permanently rise to $15 million per individual and $30 million per married couple, with automatic inflation adjustments in subsequent years. This replaces the temporary exemption of 13.99 million dollars that was scheduled to expire at the end of 2025.
- Portability remains intact. Surviving spouses can continue to utilize unused exemption amounts from their deceased spouse, helping to maximize tax-sheltering strategies.
- Enduring 40 percent top rate. The maximum federal rate for estate, gift, and GST taxes remains at 40 percent.
- Annual gift tax exclusion continues unchanged. The annual gift tax exclusion remains at $19,000 per recipient in 2025, allowing for routine transfers without eroding lifetime exemption amounts.
- State-level impacts. Some states will adjust their estate tax thresholds in response to the federal increase. For example, Connecticut will automatically match the federal exemption increase, while other states, such as New York, may maintain different thresholds. This makes state-specific review critical.
Additional Provisions That May Influence Your Plan
While not directly estate-focused, several provisions of the Act may shape your broader planning strategies:
- Charitable giving incentives. Taxpayers who do not itemize may now claim up to a $1,000 deduction for single filers or $2,000 for couples filing jointly for charitable contributions.
- Enhanced education savings options. The Act expands the definition of qualified expenses under 529 plans and introduces new accounts that provide a $1,000 government contribution, plus additional indexed contributions for eligible children.
- Business-related updates. The holding period and eligibility for the qualifying small business stock gains exclusion have been modified, offering new flexibility for transferring or structuring business interests within estates.
- Planning certainty. Unlike prior legislation that included expiration dates, these estate and gift tax exemptions are permanent, offering planners clarity and stability.
Thought-Provoking Planning Questions for You
- Would making lifetime gifts now, in anticipation of the enhanced exemptions, align with your family goals and financial situation?
- Do your existing trust arrangements, including any generation-skipping trusts, reflect the new exemption levels and charitable deduction structures?
- How might your family’s philanthropic goals be shaped by the new tax incentives for charitable giving and education funding?
- With the permanence of these provisions, is now the time to review contingency provisions in your planning for potential future policy shifts?
Why Now Matters
The increased exemptions create a rare window of legislated certainty. However, even permanent provisions can be subject to future change. Procrastination may undermine planning; thoughtful action now enhances both tax efficiency and the integrity of your legacy.
Moreover, estate planning is not purely a tax exercise. It is an opportunity to reflect your values, clarify your intentions, and educate heirs so that wealth expresses both your family identity and your purpose.
Next Steps: Work with an Experienced Estate Planner
Every family’s situation is unique. Whether your estate planning documents were drafted before 2025 or in response to previous tax laws, now is an ideal time to revisit them with precision and intentionality.
The tips shared here help in that regard, with the creation of trusts being the primary course of action to take, but you may need help to plan your estate properly. I invite you to contact my office to schedule a consultation to discuss a thoughtful strategy.
Contact Chris Diedling Law at (513) 672-6122 or via the contact form.