The recent enactment of the One Big Beautiful Bill Act (OBBA) on July 4, 2025 represents one of the most significant changes to federal tax policy in decades, with profound implications for estate planning strategies across all wealth levels. As an estate planning attorney with extensive experience navigating complex tax legislation, I can confidently say that this comprehensive law fundamentally alters the landscape for wealth transfer and estate tax planning, requiring careful attention from families, advisors, and fiduciaries alike.
The Landmark Change: Permanent Increase in Lifetime Exemptions
The centerpiece of the OBBA's estate planning provisions is the permanent (under current law) increase in the federal estate, gift, and generation-skipping transfer tax exemptions to $15 million per individual, effective January 1, 2026. This represents a substantial increase from the current 2025 exemption of $13.99 million and eliminates the looming threat of the exemption reverting to approximately $7 million that would have occurred without legislative intervention.
For married couples, this change is particularly impactful, as the combined exemption rises to $30 million from the current $27.98 million. Unlike the temporary provisions of the 2017 Tax Cuts and Jobs Act, these enhanced exemptions are permanent and will continue to be adjusted annually for inflation using 2025 as the new base year. This permanence provides unprecedented certainty for long-term estate planning strategies, allowing families to make informed decisions without the specter of automatic sunset provisions.
The practical effect of this change extends far beyond the numbers. According to estimates from the Joint Committee on Taxation, the modification will reduce federal revenue by approximately $212 billion over the next decade, while simultaneously reducing the already minimal percentage of estates subject to federal estate tax from an expected 0.2% to an even smaller fraction. This shift fundamentally changes the risk profile for many high-net-worth families who may have previously faced potential estate tax exposure.
Immediate Strategic Implications for Different Wealth Levels
The impact of these changes varies significantly depending on a family's net worth and existing estate planning structure. For individuals with estates valued between $7 million and $15 million, or married couples with combined assets between $14 million and $30 million, the likelihood of owing federal estate tax has essentially been eliminated, assuming they have not previously exhausted their lifetime exemptions through substantial gifting.
For ultra-high-net-worth families with estates exceeding the new thresholds, the additional exemption provides renewed opportunities for wealth transfer strategies. Those who have already maximized their current exemptions will find themselves with at least $1 million (or $2 million for married couples) in additional transfer capacity starting in 2026, creating fresh planning opportunities that seemed unavailable just months ago.
Perhaps most significantly, families in the middle tier of wealth accumulation now face a fundamentally different planning dynamic. Where aggressive gifting strategies were once essential to avoid estate tax exposure, these families can now focus more heavily on income tax optimization and cost basis step-up planning, altering the balance between lifetime transfers and testamentary strategies.
Qualified Small Business Stock Benefits
The OBBA significantly enhances the benefits available under Section 1202 for qualified small business stock, creating new opportunities for entrepreneurs and investors in startup companies organized as “C” corporations for tax purposes. The legislation reduces the required holding period for gain exclusion benefits, allowing 50% exclusion after three years, 75% after four years, and the full 100% exclusion after five years of ownership.
More significantly, the lifetime gain exclusion cap increases from $10 million to $15 million per issuer, while the corporate asset threshold for qualification rises from $50 million to $75 million. These changes expand the universe of companies whose stock can qualify for QSBS treatment and increase the potential tax savings for successful entrepreneurs.
For estate planning purposes, QSBS presents unique opportunities for wealth transfer. The ability to exclude substantial capital gains from taxation makes QSBS an attractive asset for gifting strategies, particularly when combined with valuation discounts for minority interests in closely held companies. The enhanced benefits under the OBBA make these strategies even more compelling for families with significant business interests.
Trust and Charitable Planning Considerations
The permanent nature of the increased gift tax exemption creates new opportunities for sophisticated trust planning strategies. Irrevocable grantor trusts, which allow the grantor to pay income taxes on trust income while preserving the trust principal for beneficiaries, become even more attractive when larger amounts can be transferred without gift tax consequences.
Similarly, sales to intentionally defective grantor trusts can now accommodate larger transactions, potentially allowing families to transfer more significant business interests or investment portfolios to future generations while minimizing transfer tax exposure. The increased exemptions also enhance the effectiveness of grantor retained annuity trusts (GRATs) and charitable lead annuity trusts (CLTs) by providing more flexibility in structuring these transactions.
The legislation also makes modest but meaningful changes to charitable giving rules. For taxpayers who do not itemize deductions, the OBBA reinstates a charitable deduction of up to $1,000 for single filers and $2,000 for joint filers. For itemizing taxpayers, the law introduces a 0.5% floor on charitable deductions (subject to IRS interpretive guidance), reducing the deductible amount by that percentage of the taxpayer's adjusted gross income.
Income Tax Rate Permanence and Planning Certainty
Beyond the estate tax changes, the OBBA makes permanent the individual income tax rates established in the TCJA, providing crucial certainty for long-term income tax planning. The continued availability of the 20% pass-through business deduction for qualifying business income also remains permanent, affecting how business owners structure their operations and succession planning.
This rate certainty enables more sophisticated long-term planning strategies. Families can now confidently implement multi-year Roth conversion strategies, knowing that the favorable rate environment will persist. Similarly, the timing of income recognition from business sales, investment gains, and trust distributions can be optimized with greater confidence about future rate exposure.
New Savings Vehicles and Educational Planning
The OBBA introduces "Trump Accounts” (with implementation details pending from IRS/Treasury), a new savings vehicle for children under 18, beginning in 2026. These accounts allow annual contributions of up to $5,000, with employer contributions of up to $2,500 also permitted. The government will automatically fund these accounts with $1,000 for babies born between 2025 and 2028, creating a foundation for long-term savings.
The legislation also expands the permitted uses of Section 529 education savings plans to include additional K-12 expenses such as tutoring, textbooks, test preparation, online learning, and special education services. These enhanced benefits make Section 529 plans even more attractive vehicles for educational funding and intergenerational wealth transfer.
Strategic Recommendations
For families with estates currently below the new exemption thresholds but approaching them through asset appreciation, the focus should shift toward income tax optimization and basis step-up planning. These families can now confidently hold appreciating assets until death to capture the stepped-up basis benefit, rather than making lifetime gifts that preserve the low-basis character of the assets.
Families who have already engaged in substantial gifting programs should reassess their strategies in light of the increased exemptions. While completed gifts continue to provide their intended benefits of removing future appreciation from the taxable estate, the additional exemption capacity may warrant modifications to future gifting plans or the unwinding of certain strategies that may no longer be necessary.
Ultra-high-net-worth families should continue implementing sophisticated wealth transfer strategies, but with greater flexibility and reduced urgency. The permanent nature of the exemptions eliminates the December 31, 2025 deadline that had been driving accelerated planning activities throughout 2025.
State-Level Considerations Remain Critical
While the federal exemption increases provide substantial relief, families must continue to consider state-level estate tax exposure. States like Massachusetts with a $2 million exemption threshold, and others with their own estate tax regimes, create ongoing planning challenges that the federal changes do not address, since the OBBA does not preempt state estate tax regimes.
The interplay between federal and state estate tax systems requires continued careful analysis and planning.
Implementation Timeline and Action Items
The estate tax exemption changes take effect January 1, 2026, providing families with time to reassess their current strategies and implement any necessary modifications.
Families should review their existing estate planning documents to ensure they remain appropriate under the new law. Trust agreements that include specific dollar thresholds, funding formulas based on exemption amounts, or other provisions tied to tax law parameters may require amendment or restatement.
The permanent nature of the exemption increase also provides an opportunity to simplify estate plans that had become unnecessarily complex in response to uncertainty about future tax law changes. Some families may find that sophisticated strategies implemented to address the threatened exemption reduction are no longer necessary or optimal.
Professional Guidance Remains Essential
The OBBA's complexity extends far beyond the estate tax exemption increase, with numerous interrelated provisions affecting income taxes, business operations, charitable giving, and retirement planning. The legislation's interaction with existing state laws, previously implemented estate planning strategies, and individual family circumstances requires careful professional analysis.
Estate planning is inherently interdisciplinary, requiring coordination among attorneys, tax professionals, financial advisors, and other specialists. The OBBA's comprehensive scope makes this coordination even more critical, as changes in one area of the law may have unexpected consequences in others.
A New Era of Estate Planning Certainty
The One Big Beautiful Bill Act represents a watershed moment in estate planning, providing both immediate relief from estate tax exposure and long-term certainty about transfer tax policy. The permanent, inflation-adjusted $15 million exemption eliminates estate tax concerns for the vast majority of American families while creating new opportunities for sophisticated planning among the ultra-wealthy.
However, this new certainty should not lead to complacency. Estate planning remains a dynamic process that must adapt to changing family circumstances, business conditions, and legal environments. The OBBA provides a stable foundation for planning, but successful wealth transfer strategies still require ongoing attention, professional guidance, and periodic review.
The legislation also demonstrates the importance of maintaining flexibility in estate planning structures. The dramatic changes between the threatened exemption reduction and the actual exemption increase highlight how quickly the planning environment can shift, emphasizing the value of strategies that can adapt to changing circumstances rather than relying on specific tax law assumptions.
For estate planning professionals and their clients, the OBBA offers both opportunity and responsibility. The opportunity lies in the enhanced flexibility and reduced tax pressure that the legislation provides. The responsibility involves carefully reassessing existing strategies, implementing necessary changes, and maintaining the professional expertise required to navigate an increasingly complex legal and tax environment.
As we move forward in this new era of estate planning, the families who approach these changes thoughtfully and strategically will be best positioned to maximize the benefits of this landmark legislation while building robust, flexible plans that can adapt to future changes in the law and family circumstances.
Richard P. Breed, III is a partner at Tarlow Breed Hart & Rodgers, P.C. in Boston, Mass. Please connect with Rick at www.linkedin.com/in/rick-breed/
