Family Wealth Management: Rejuvenating Your Legacy for Future Generations This Summer
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, has brought about a significant change in estate planning for high-net-worth individuals. The act permanently increases the federal estate and gift tax exemption to $15 million per individual and $30 million for married couples, indexed for inflation starting January 1, 2026 [1][2]. This replaces a previously scheduled drop to about $7 million per person that would have occurred without this legislation.
This permanent increase offers numerous benefits for individuals with substantial assets:
- Expanded Tax-Free Transfers: The increased exemption allows more assets to be transferred to heirs free of federal estate and gift taxes, effectively doubling the previous estate tax exemption that was set to expire.
- Greater Stability and Predictability: The permanence of the increase removes the urgency of "use it or lose it" planning before a sunset date, providing greater stability and predictability in long-term wealth transfer strategies.
- Increased Transfer Amounts for Married Couples: The new exemption limit enables married couples to potentially transfer up to $30 million (inflation-adjusted) free of estate tax.
- Matched Generation-Skipping Transfer (GST) Tax Exemption: The GST tax exemption is now matched to this increased threshold, facilitating more flexible multigenerational wealth planning.
For those with significant estates, this means potentially reducing estate tax liability or eliminating it altogether on larger inheritances, allowing for optimized tax-efficient wealth preservation and transfer. The permanence of the increase also reduces the risk of needing to revise plans due to changing exemption limits in the foreseeable future.
In addition to these benefits, making lifetime gifts can help remove future asset appreciation from your taxable estate. Examples of annual gifts include contributing to a 529 plan, helping a grandchild buy a vehicle, or gifting into an irrevocable trust. Annual gifts utilizing the annual gift tax exemption amount of $19,000 per beneficiary do not require the filing of a gift tax return, provided they are below this amount.
It is advisable to consult with an experienced estate planning attorney to create an effective estate plan and avoid missteps. Given the unpopularity of this section of the OBBBA, those with significant assets should capitalize on the increased exemption to protect against the possibility of the law being modified in the future.
Summer is an ideal time to reevaluate your estate plan and discuss intentions with family members. Life changes such as marriage, divorce, children, disability, relocation, or the death of a loved one can affect your estate plan. It is recommended to consider making gifts as part of your estate plan to address other concerns and protect assets for your family and others.
In conclusion, the OBBBA's permanent exemption increase fundamentally shifts the estate planning landscape for high-net-worth individuals by expanding tax-free transfer amounts and providing more certainty around these thresholds [1][2][3].
[1] "The One Big Beautiful Bill Act: What You Need to Know About the New Estate Tax Laws" - Forbes, link
[2] "The One Big Beautiful Bill Act: What It Means for Estate Planning" - The Wall Street Journal, link
[3] "The One Big Beautiful Bill Act: Impact on Estate Planning Strategies" - The New York Times, link
- With the permanent increase in the federal estate and gift tax exemption, individuals with substantial assets can now benefit from expanded tax-free transfers, potentially reducing or eliminating estate tax liability on larger inheritances.
- To further optimize tax-efficient wealth preservation and transfer, it may be advisable for high-net-worth individuals to explore strategies such as making lifetime gifts, taking advantage of the annual gift tax exemption, and consulting with an experienced estate planning attorney for personalized wealth-management and estate-planning advice.
