Tax Planning Under the “One Big Beautiful Bill Act” (OBBBA)
The “One Big Beautiful Bill Act” provides greater certainty for estate planning by extending key provisions of the 2017 Tax Cuts and Jobs Act. Most notably, it preserves the elevated federal estate, gift, and generation-skipping transfer (GST) tax exemptions that were previously scheduled to be reduced after 2025. This change eliminates the urgency many investors felt to make large gifts before a looming deadline, but it does not remove the need for thoughtful, flexible planning.
Key Planning Considerations
Shift from urgency to strategy
With the indefinite extension of current exemption levels—$15 million per individual and $30 million per married couple—the immediate “use it or lose it” pressure has eased. However, tax laws can change quickly, and personal circumstances may evolve, making it important to regularly review and update estate plans.
Step-up in basis
How assets are transferred remains critical. Gifting assets during your lifetime passes along your original cost basis, potentially resulting in capital gains taxes for the recipient. In contrast, assets transferred at death often receive a “step-up” in basis to their current market value, which can significantly reduce or eliminate capital gains tax. This distinction is a central factor when deciding between lifetime gifting and transfers through an estate.
Portability of exemptions
For married couples, any unused portion of the estate and gift tax exemption can transfer to the surviving spouse (if properly elected on a federal estate tax return). This “portability” can effectively double the amount shielded from federal estate taxes and eligible for basis step-up. However, not all assets qualify, so careful structuring is essential.
Generation-skipping transfer (GST) exemption
The GST exemption—$15 million per person—protects transfers to grandchildren or later generations from a 40% tax. Unlike the estate exemption, it is not portable between spouses and must be actively used or allocated through estate planning tools such as trusts.
Broader Strategic Focus
With higher exemptions in place, the focus for many individuals shifts away from federal estate taxes and toward broader planning goals:
- State-level taxes: Some states impose estate or inheritance taxes, which can significantly impact wealth transfer even if federal taxes do not apply.
- Core documents: Wills, powers of attorney, healthcare directives, and guardianship designations remain essential regardless of estate size.
- Flexibility: Given the possibility of future legislative changes, estate plans should allow for adjustments if exemptions are reduced later.
Planning by Wealth Level
- Moderate estates (within exemption limits): Planning emphasizes state taxes, efficient asset transfer, and personal legacy goals.
- Higher-net-worth individuals: Those with assets exceeding the exemption should prioritize strategies to limit estate growth and reduce tax exposure, such as trusts and estate-freezing techniques.
Additional Tools
The OBBBA also expands planning opportunities through enhanced 529 education savings plans and new tax-advantaged accounts for children. These tools can support multigenerational wealth transfer and financial education.
Bottom Line
The OBBBA reinforces that estate planning is about more than minimizing taxes—it also encompasses asset protection, control, privacy, and legacy. While current law provides stability, future changes are always possible. A flexible, regularly updated estate plan is essential to ensure your wishes are preserved and your beneficiaries are well-positioned for long-term financial success.
Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. This material is being provided for information purposes only and does not constitute a recommendation.
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