The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, brings permanent clarity to the federal estate tax landscape. The law sets the estate and gift tax exemption at $15 million per individual, or $30 million for married couples, with annual inflation adjustments to be made moving forward. This replaces the prior uncertainty around the Tax Cuts and Jobs Act (TCJA), which was scheduled to cut the exemption roughly in half starting in 2026.
The increase to $15 million per individual and $30 million per married couple will take effect on January 1, 2026. Until then, the exemption remains at $13.99 million per individual for 2025.
For high-net-worth individuals, family business owners, and their advisors, this permanence brings much-deserved relief.
Stability Replaces Urgency
Estate planners have spent years helping clients work around the “sunset” of the enhanced exemption. Many opted for large lifetime gifts or complex trust structures to capture the temporary benefit. With the exemption now locked in, there’s less pressure to rush. Instead, clients can plan strategically and with confidence, without racing the calendar or Congress. Of course, nothing in the new Act prevents a future Congress could change the exemption.
Why You Should Review Your Current Estate Plan
Even if you’re not planning to make additional gifts right away, this change may impact how your estate plan functions. Many plans drafted over the last decade rely on formulas tied to “the federal exemption in effect at death.” If that exemption is now three times what your plan was initially designed around, those formulas could have unintended consequences.
For example, a credit shelter trust may now hold far more than was intended, potentially disinheriting or delaying distributions to certain family members. Gifting strategies, asset allocation, and the use of generation-skipping transfers may also warrant reevaluation.
What the New Law Means for You
Here’s a quick look at what’s changed and what hasn’t:
What’s new:
- $15 million exemption per individual ($30 million for married couples)
What stays the same:
- Top estate tax rate remains at 40%
- Portability election for surviving spouses is still available
- Step-up in basis at death remains in place
- The exemption applies to transfers during life and at death
- The exemption is indexed for inflation
Implications for Business Owners
The increased exemption makes it easier to transfer closely held business interests without triggering the estate tax. Family business owners can now pass more value down to the next generation, either through lifetime gifting or structured succession, without relying as heavily on advanced strategies like GRATs or valuation freezes.
Still, long-term planning remains essential. Business succession decisions should coordinate with shareholder agreements, valuation methods, and liquidity planning for future tax years.
Coordinating with the Bigger Picture
Federal estate taxes are just one part of the planning equation. Clients should also consider:
- Income tax on inherited retirement accounts (IRAs, 401(k)s)
- Potential capital gains exposure depending on how assets are transferred
- The absence (for now) of Ohio estate or inheritance tax, and the possibility that it could change
Estate plans should continue to evolve in coordination with income tax planning, charitable giving strategies, and financial goals across generations.
When to Act
If your estate plan was built around the TCJA sunset, or hasn’t been updated in the last few years, this is the right moment to revisit it. Those who made large gifts between 2018 and 2025 may want to evaluate how much exemption remains available. Others may choose to simplify older plans that no longer reflect current goals or tax realities.
Looking Ahead
Our team at Carlile Patchen & Murphy is here to help you take full advantage of this new planning landscape. Whether you need to revise an outdated plan or want to explore fresh strategies for gifting, business succession, or charitable legacy, we’re ready to guide you.
Next in our OBBBA blog series: Charitable Giving in the New Tax Environment, we’ll unpack how non-itemizers and high-net-worth philanthropists alike can rethink their giving under the new rules.
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