The passage of H.R. 1, known as the One Big Beautiful Bill Act (OBBBA), delivers much-needed clarity for high-net-worth individuals by increasing the federal gift and estate tax exclusions and enacting other changes that open new doors for more effective tax and wealth transfer planning.
New $15 Million Exclusion Offers Certainty
Starting in 2026, the federal gift and estate tax exclusion will rise to $15 million per person ($30 million for married couples). This adjustment eliminates prior uncertainty around a potential reversion to the levels in effect before the 2017 tax law changes (about $7 million) and provides a reliable framework for long-term estate planning.
The new thresholds will be adjusted annually for inflation, while the top estate tax rate remains at 40%. For married couples, this means more than $30 million could eventually be passed on to future generations without triggering federal estate tax.
Annual Gift Tax Exclusion Remains
In 2025, individuals can gift up to $19,000 per recipient without dipping into their lifetime exemption or incurring gift tax. There’s no cap on the number of recipients, making this a flexible way to reduce taxable estates over time.
Portability between spouses remains in effect, allowing a surviving spouse to use any unused portion of their deceased spouse’s exclusion.
For taxpayers who have already used most of their exemption, the new law provides fresh capacity for additional tax-free gifts beginning in 2026 and offers a valuable chance to support heirs and mitigate future estate taxes.
Increased GST Exemption for Generational Planning
The generation-skipping transfer (GST) tax exemption will also rise to $15 million per person in 2026 (and will be indexed for inflation). This exemption allows tax-free transfers to grandchildren or other beneficiaries two or more generations younger. The exemption can be applied during life or at death, often in combination with trusts that can shield future asset appreciation from taxation.
Permanent Individual and Trust Income Tax Rates
The OBBBA also locks in the lower individual and trust income tax rates and broader tax brackets established under the 2017 tax law changes, ensuring continued benefits for many taxpayers.
Don’t Overlook State-Level Estate Taxes
While federal changes are significant, state-level estate tax rules vary widely. Some states impose their own estate taxes with much lower exemptions than the federal threshold, and others have no estate tax at all.
This makes it essential to tailor your estate plan to your state of residence, using strategies such as trusts or lifetime gifts to reduce potential tax burdens.
Key Planning Opportunities
With the lifetime gift and estate tax exclusion increasing to $15 million in 2026, high-net-worth individuals have a unique opportunity to transfer additional wealth tax-free.
This can be especially advantageous when transferring hard-to-value assets like private business interests or real estate. The higher exemption provides a buffer if valuations are challenged by the IRS.
By gifting appreciating assets now, you remove both the current value and future growth from your taxable estate. Acting early allows you to take full advantage of the new limits and ensure your wealth transfer goals are met.
Now is the time to revisit your estate plan, evaluate gifting strategies, and consult your tax and legal advisors. Proactive planning today can result in significant tax savings and lasting benefits for your family.
To discuss how these changes may impact your estate plan, contact us today.
