What Is the OBBBA and Why It Matters
Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) brings lasting changes to federal tax law, with major implications for estate and gift taxes. For high-net-worth individuals and families, these changes represent an opportunity to build long-term estate plans with increased certainty, flexibility, and tax efficiency.
Key Impacts on Trusts and Estates
1. Increased Estate and Gift Tax Exemption
Beginning in 2026, the estate and gift tax exemption will permanently increase to $15 million for individuals and $30 million for married couples. This is a substantial jump from the 2025 exemption of $13.99 million per individual.
2. Higher GST Tax Exemption
The generation-skipping transfer (GST) tax exemption also increases to $15 million per person, indexed for inflation. This allows for more tax-efficient transfers to grandchildren or other “skip” beneficiaries.
Strategic Estate Planning Implications
Greater Opportunity for Wealth Transfer
The higher exemption limits simplify the process of transferring significant assets without complex planning. Individuals can now transfer more wealth tax-free, during life or at death.
Trust Structure Reevaluation
This shift may prompt a review of existing trusts. Some may need to be updated or replaced to better reflect the new exemption thresholds and distribution strategies.
Now Is the Time for Proactive Planning
Families with substantial estates should assess their current plans. Waiting could lead to missed opportunities or future exposure if laws change again.
Accelerated Gifting Strategies
Now may be a prime time to make lifetime gifts while the exemption is high. Future administrations could reduce these limits.
Renewed Importance of Credit Shelter Trusts
With TCJA provisions set to expire in 2025, bypass (or credit shelter) trusts become a powerful tool for preserving both spouses’ exemptions.
Taxation of Trusts in 2025
Income Tax Rates for Trusts
Estates and non-grantor trusts face a top federal income tax rate of 37% on taxable income exceeding $15,650.
Capital Gains Tax Rates
- 0% for income up to $3,250
- 15% for income between $3,250 and $15,900
- 20% for income over $15,900
Estate Tax Portability
Portability rules remain unchanged, allowing surviving spouses to utilize the unused exemption of their deceased spouse.
Additional Considerations
State-Level Estate Taxes Still Apply
Some states impose estate or inheritance taxes regardless of federal thresholds. Estate plans must consider both state and federal exposure.
TCJA Sunset and Legislative Risk
While OBBBA blocks the 2026 TCJA sunset for exclusion amounts, future tax legislation may still impact the structure and benefits. Flexibility in planning is key.
Consult with Experts
These changes add complexity and opportunity. A tax advisor or estate planning attorney can help tailor strategies to individual goals, assets, and state-specific laws.
Final Thoughts
The One Big Beautiful Bill Act creates a more generous and permanent framework for estate and gift planning. For families aiming to protect and transfer wealth, this is the moment to act. Reviewing trust structures, maximizing exemptions, and engaging in strategic gifting are all vital next steps. At Gulla CPA, we’re here to help you build a legacy with clarity and confidence.
