On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, significantly reshaping the federal estate, gift, and generation-skipping transfer (GST) tax landscape. Beginning January 1, 2026, the law increases the federal transfer tax exemption and eliminates the sunset provision that had created years of planning uncertainty.
These changes provide expanded planning opportunities for families, business owners, and individuals focused on long-term wealth preservation.
Increased Federal Estate, Gift, and GST Tax Exemption
Effective January 1, 2026, the federal estate, gift, and GST tax exemption increases to $15 million per individual, or $30 million per married couple with proper planning and portability elections. This represents a substantial shift from prior law.
Before passage of the OBBBA, the enhanced exemption created under the Tax Cuts and Jobs Act was scheduled to sunset at the end of 2025. Without legislative action, the exemption was expected to drop to approximately $6–7 million per person in 2026. Instead, the new law not only prevents that reduction but raises the exemption above the 2025 level of $13.99 million.
Beginning in 2027, the exemption will continue to adjust for inflation. The GST exemption is fully aligned with the estate and gift tax exemption at $15 million per individual, simplifying multigenerational planning and expanding opportunities for long-term trust strategies designed to benefit children, grandchildren, and future descendants.
Estate Tax Rate Remains at 40 Percent
While the exemption amount has increased, the top federal estate tax rate remains 40 percent on assets exceeding the exemption. For individuals and families with appreciating real estate, closely held businesses, concentrated stock positions, or substantial investment portfolios, exposure to federal estate tax may still exist.
As asset values grow over time, estates that are currently below the exemption threshold may eventually exceed it. Ongoing monitoring and strategic planning remain important, particularly for high-net-worth households.
Why Planning Still Matters
Although the new law offers greater flexibility and removes the immediate sunset concern, proactive planning remains essential. Many existing trusts were drafted under different exemption assumptions and may benefit from review. Lifetime gifting strategies, portability elections, beneficiary designations, and liquidity planning should all be evaluated in light of the updated exemption.
It is also important to remember that federal law is only one part of the analysis. Many states impose separate estate or inheritance taxes with significantly lower exemption amounts, and those rules continue to apply independently of the federal changes.
Moving Forward
The 2026 federal transfer tax changes provide expanded opportunity and greater structural stability in estate planning. For many families, this is an ideal time to revisit existing documents and consider whether adjustments are appropriate to take full advantage of the new law.
If you would like to discuss how these changes affect your estate plan, Seasons Law, P.C. is available to guide you through a thoughtful review and planning strategy tailored to your goals.
