Estate Planning in the Era of the One Big Beautiful Bill

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, bringing sweeping changes to the U.S. tax code. For individuals and families focused on preserving wealth, this legislation offers new opportunities, as well as some challenges. Below is a breakdown of how OBBBA impacts estate planning for American citizens.

1. Increased Estate Tax Exemption

The lifetime exemption for estate, gift, and generation-skipping transfer (GST) taxes is now $15 million per person (or $30 million per couple), indexed for inflation. This allows for more tax-free wealth transfer using strategies like:

• Spousal Lifetime Access Trusts (SLATs)
• Intentionally Defective Grantor Trusts (IDGTs)
• Grantor Retained Annuity Trusts (GRATs)

2. Portability and GST Planning

Portability of the estate and gift tax exemption between spouses is preserved, simplifying planning for married couples. However, the GST exemption remains non-portable, requiring careful allocation to maximize multigenerational wealth transfer.

3. Higher Annual Gift Tax Exclusion

The annual exclusion for tax-free gifts has increased to $19,000 per recipient, enhancing flexibility for lifetime gifting without using the lifetime exemption.

4. SALT Deduction Cap and Trust Stacking

The State and Local Tax (SALT) deduction, a federal tax break that allows taxpayers who itemize their deductions to subtract certain state and local taxes from their adjusted gross income, is temporarily capped at $40,000 per household, phasing out at higher income levels. This opens the door for trust stacking strategies using multiple nongrantor trusts to multiply deductions.

5. Charitable Giving Enhancements

The 60% of Adjusted Gros Income (AGI) limit for cash contributions to qualified charities is now permanent. A new 0.5% AGI floor means only contributions exceeding that threshold are deductible, encouraging strategic giving through:

• Donor-Advised Funds
• Charitable Lead Trusts

6. Basis Step-Up and Income Tax Stability

The step-up in basis at death remains unchanged, preserving a key benefit for heirs. Additionally, the permanence of the 2017 Tax Cuts and Jobs Act (TCJA) income tax brackets provides predictability for long-term planning.

7. Planning Amid Political Uncertainty

Although labeled “permanent,” these provisions are subject to future legislative changes. With potential political shifts, tax payers should act now to lock in favorable conditions and remain agile.

Final Thoughts

The One Big Beautiful Bill Act presents a rare window of opportunity for estate planning. Whether you're updating your will, establishing trusts, or exploring charitable giving, now is the time to revisit your strategy. Consult with a qualified estate planning attorney to tailor your approach to your unique goals and family dynamics.