High-net-worth individuals and families often face intricate estate planning decisions. The recently passed One Big Beautiful Bill Act (OBBBA) significantly impacts estate and gift tax planning, especially for those whose estates are near or exceed the $7 million mark. This blog aims to clarify the act's implications, presenting them in an actionable format.

The New $15 Million Lifetime Exclusion

Starting in 2026, a $15 million lifetime exclusion applies to both estate and gift taxes, adjusted for inflation. This change offers a substantial benefit for many families.

Combined $30 Million Exclusion for Couples

For couples, the act allows for a combined $30 million exclusion. This drastically reduces tax exposure and offers significant planning opportunities.

Risks of the Previous $7.2 Million Threshold

The former projected threshold of $7.2 million posed risks for many. The new legislation alleviates this looming tax burden, offering greater security.

Previously Used Exclusions Still Count

It’s crucial to understand that exclusions used previously are still valid. For example, someone who used $13.99 million can gain an additional $1.01 million in 2026, thus widening planning strategies.

Portability and GST Rules Unchanged

Rules regarding portability and GST remain the same. Portability allows for the transfer of unused estate exclusions, requiring a federal estate tax return, while GST exemption remains non-transferable.

Permanence and Risks of the Law

While the act is permanent and lacks a sunset clause, potential changes mean timely planning is advisable to stay ahead.

Updates for High Earners and Charitable Givers

The top tax rate of 37% remains, with a deduction cap and a rule for cash donations capped at 60% of AGI over 0.5% of income. These updates affect high earners and philanthropists keen on maximizing their contributions.

Reduced Urgency, Ongoing Importance

While the urgency has lessened without a 2025 deadline, the need for strategic planning remains crucial. Flexibility in planning is now greater, but action is essential.

The OBBBA provides expanded opportunities and increased stability, yet complexity persists, particularly for those who've made large gifts. Now is the ideal time to update or develop a robust estate plan. It's wise to connect with an advisor for personalized advice and to make the most of the increased exclusions while the laws remain favorable.