What the OBBB lifetime gift exemption means for estate planning
The recently passed One Big Beautiful Bill Act (OBBB) introduces a significant shift in estate and gift tax planning. One of the most impactful provisions is the permanent increase of the federal estate and gift tax exemption to $15 million per individual, or $30 million for married couples, effective January 1, 2026.
The OBBB lifetime gift exemption eliminates the uncertainty surrounding the previously scheduled sunset of the Tax Cuts and Jobs Act (TCJA) provisions. It also provides long-term clarity for individuals and families planning for wealth transfer.
Here are more details about the OBBB updates and how they may impact your estate plan:
2025 estate tax exemption increase under OBBB
The TCJA estate and gift tax exemption was temporarily doubled from $5 million (indexed for inflation) to $10 million (indexed for inflation). With inflation adjustments, the 2025 exemption is $13.99 million per individual.
This increase was set to expire at the end of 2025, reverting to pre-TCJA indexed levels of around $7 million per person. However, the OBBB lifetime gift exemption now locks in a higher baseline of $15 million, with annual inflation adjustments beginning in 2027.
The Generation-Skipping Transfer (GST) tax exemption also aligns with the new estate and gift tax thresholds. The top federal estate, gift and GST tax rate remains at 40%.
How the OBBB impacts estate planning
This permanent increase offers a valuable opportunity to transfer more wealth without triggering federal transfer taxes, whether during life or at death.
Individuals looking to update or start their estate plan can now benefit from:
- Accelerated lifetime gifting: Individuals can now gift up to $15 million without incurring federal gift tax, enabling more robust use of irrevocable trusts, family partnerships and other planning vehicles.
- Enhanced multi-generational planning: With the GST exemption also increased, it’s now more feasible to fund long-term trusts that benefit multiple generations.
- Strategic estate freezes: Techniques such as grantor retained annuity trusts (GRATs) and sales to intentionally defective grantor trusts (IDGTs) become even more effective when paired with the expanded exemption.
Estate planning strategies after OBBB
While the increased exemption is a welcome development, thoughtful planning remains essential to create an estate plan that works for your financial goals.
Here are four important considerations for estate planning under the OBBB:
1. Take advantage now
Although the exemption is now permanent, future legislation could change that.
Updating or creating your plan sooner can help you lock in current benefits. For individuals without an existing estate plan, laying the groundwork sooner allows you to create a framework that can be adjusted over time.
Early action makes it easier to evolve your plan so that it stays aligned with life changes and your personal and financial objectives. It also allows you to transfer assets before they appreciate and implement long-range financial planning with greater precision and flexibility.
2. Review existing plans
Even if you’ve already optimized your plan for the TCJA exemption increase, you may need to update it to reflect the new thresholds. Reviewing also provides a critical opportunity to update your plan to reflect any significant life changes, such as marriages, births or an increase in wealth.
3. Coordinate with state law
Many states have their own estate tax rules with lower exemptions. Planning should be coordinated to avoid unintended state-level tax consequences and reduce exposure.
Additionally, some states are community property states with their own peculiarities. Anytime you change your state residency, you may want to review your estate plan.
4. Coordinate with income tax law
When assets are transferred, there are varying income tax impacts to the transferor as well as the transferee. Effective planning considers how to maximize the income tax benefits while accomplishing the transfer tax objectives.
How Wipfli can help
Wipfli’s personalized estate and gift planning services are designed to help preserve your financial legacy through proactive tax strategies and proven tools. Our experienced team provides comprehensive support, including valuation services, charitable giving optimization and multi-generational wealth planning, so you can better navigate uncertain tax environments.
Contact us today to learn how we can help you maximize exemptions with a plan tailored to your unique goals.
Explore our estate plan servicesYou can also find more estate planning tips with these additional resources:
