July 21, 2025

The recent passage of the One Big Beautiful Bill Act of 2025 ("OBBBA") creates a number of estate planning opportunities for families, business leaders, and individuals. In addition to the provisions highlighted below, please also reference our firm's July 12, 2025 article HERE for additional discussion of the OBBBA as it applies to businesses and investors.

1.       Estate, Gift, and Generation-Skipping Transfer Tax Exemption Doubled and Made Permanent.

Beginning January 1, 2026, the unified estate and gift tax exemption amount is permanently increased to $15,000,000.00 per individual (indexed for inflation), eliminating the sunset of the Tax Cuts and Jobs Act previously scheduled for 2026. Taxpayers should have certainty of knowing that for the foreseeable future, estate and gift exemption amounts will remain elevated unless or until a future congress passes legislation to the contrary.

• For married couples, this effectively means $30,000,000.00 of wealth can be transferred free and clear of estate and gift tax.
• The "portability" provision remains intact, allowing a surviving spouse to use a deceased spouse’s unused exemption upon the timely filing of a Form 706 Estate Tax Return.
• The top federal estate and gift tax rate remains at 40%.
• The Generation Skipping Transfer Tax ("GSTT") exemption is also increased to $15,000,000.00 per individual and is also indexed for inflation. There is no portability of a GSTT exemption.
• The "basis step up at death" regime is unchanged.
• No change in valuation discounting for closely-held business interests.

Wealthy taxpayers above the $15,000,000.00 threshold should continue to prioritize lifetime gift tax planning and testamentary estate tax planning strategies to defer or mitigate future wealth transfer tax obligations. The utilization of closely held business entities and valuation discounting should remain a top priority for taxpayers who are concerned about estate taxation. For estate planning clients who are less concerned about estate taxation under the OBBBA, care should be taken to maximize their "step-up in basis" at the time of death. Taxpayers with low-basis assets titled to certain irrevocable trusts should contact their tax advisors to determine whether these assets may receive a step-up in basis at any point.

2.       "Trump Accounts" for Children Born After 2025 and Expanded Use of Section 529 Plans.

Taxpayers who benefit children, grandchildren, and other young beneficiaries through their estate planning should be aware of certain new opportunities under the OBBBA.

Trump Accounts

• Starting in 2026, each child born in the U.S. is eligible to receive a one-time government contribution of $1,000 to a tax-advantaged account.
• The account operates similarly to a Roth IRA, growing tax-free and allowing withdrawals upon achieving the age of 18 for "qualified expenses" such as higher education, first-time home purchases, or small business expenses. These qualified expenses are pending further regulatory guidance. Unused funds may be rolled into a Roth IRA upon the beneficiary reaching age 30.
• Parents and grandparents can contribute up to $5,000 per year per child (post-tax dollars), with no income phase-outs.

Expanded use of Section 529 Plans.

• The OBBBA expands the scope of tax-exempt distributions. Under the new provisions, 529 plan funds can now be used for educational expenses related to enrollment or attendance at elementary or secondary public, private, or religious schools.
• The expanded list of eligible expenses includes tuition, curriculum and curricular materials, books, online educational materials, tutoring, educational classes outside the home, fees for standardized tests, advanced placement exams, college admission exams, dual enrollment fees, and educational therapies for students with disabilities provided by licensed professionals.

3.       Changes to Charitable Deduction Rules.

      The OBBB also reforms charitable giving:

• Taxpayers taking the "standard deduction" can take an above-the-line deduction for charitable gifts of up to $1,000.00 per individual and $2,000.00 for a married couple.
• Individuals now face a "floor" of 0.5% of the taxpayer's contribution base (which is generally adjusted gross income) on their charitable deductions. Thus and otherwise deductible charitable contribution must be reduced by .5% of an individual's contribution base for the year.
• Corporate taxpayers face a similar new floor of 1%.
• The 60% AGI limit for cash contributions to certain public charities is made permanent. Under prior law, the rule providing the 60% ceiling for cash gifts was slated to expire in 2025.

4.       Bonus Depreciation and Section 179 Expensing Made Permanent—With a Twist.

Estate planning clients who own real estate, closely held businesses, business equipment and other capital assets should be aware of changes to Section 168(k) and Section 179 concerning the depreciation and expensing options available under the OBBBA.

• 100% bonus depreciation is permanently extended, applicable to new and used qualified property placed in service after 2025. The OBBBA did not alter the types of property eligible for bonus depreciation.
• The phase-out previously scheduled to reduce bonus depreciation to 80% in 2026 and then to 0% by 2027 is repealed.
• Section 179 expensing limits are increased to $2.5 million annually, with phaseouts beginning at $4 million, both indexed for inflation.