Q: I haven’t looked at my estate planning for a long time. I’ve heard about the new One Big Beautiful Bill Act (OBBBA). Does it affect my estate planning?
A major change made by OBBBA was to increase the lifetime estate and gift tax exemption amount and make it “permanent.” Prior to OBBBA’s passage, the Tax Cuts and Jobs Act of 2017 set the lifetime estate and gift tax exemption at $10,000,000, indexed for inflation. In 2025, the exemption amount is $13,990,000. For estates valued at less than the exemption amount, no federal estate tax will be due. The exemption amount was scheduled to “sunset” or end in 2026 and revert to the pre-2017 amount of $5,000,000, indexed for inflation.. OBBBA permanently increased the exemption to $15,000,000 per person in 2026, indexed for inflation in the following years. In addition, spouses can have a combined amount of $30,000,000 starting in 2026 through the concept of “portability.”
Given the exemption, it is unlikely that most families will need to pay federal estate tax. For those with assets exceeding the exemption, advanced estate planning techniques are available to reduce or eliminate the estate tax.
For many, this may be an opportunity to simplify existing estate plans signed at times when the exemption amount was much lower. For example, the exemption was only $1,500,000 twenty years ago. Estate plans established when the exemptions were much lower often used sophisticated techniques, for example, creating separate trusts for spouses that would further split into multiple sub-trusts upon the death of a spouse. Many couples can now simplify their planning by reducing the number of trusts they currently have or are created after their deaths.
Also, keep in mind that some states have their own estate/death taxes, and each set their own exemption, which may not match the federal exemption. For example, the Massachusetts estate tax exemption is currently $2,000,000. Therefore, even though federal estate tax may not be a concern, more sophisticated planning is needed to reduce state estate tax.
As an additional caution, although OBBBA states that the higher exemption is permanent, we can expect tax laws to fluctuate with changing tax policy and political administrations. We always recommend speaking with an attorney to discuss your unique circumstances and ensure your estate plan aligns with your goals.