Understanding the One Big Beautiful Bill Act: What You Need to Know About Estate and Gift Tax Exclusions

On July 4, 2025, President Trump enacted a significant piece of legislation known as the One Big Beautiful Bill Act (OBBBA). This new law extended—and may have made permanent—essential provisions from the 2017 Tax Cuts and Jobs Act (TCJA), particularly focusing on the Lifetime Estate, Gift, and GST Tax Exclusion. Understanding these changes is crucial for effective estate planning and maximizing tax benefits.

What is the Lifetime Estate, Gift, and GST Tax Exclusion?

The Lifetime Estate, Gift, and GST Tax Exclusion is a tax threshold that determines how much an individual can transfer without incurring federal estate taxes. If the value of an individual’s estate surpasses this exclusion limit at the time of death, a steep 40% estate tax may apply to the excess amount. The exclusion amount is particularly important for taxpayers who plan to make significant gifts or leave substantial estates.

Individuals can lower their Exclusion Amount by using it for taxable gifts during their lifetime. For instance, if you gift a portion of your total exclusion amount, your remaining exclusion amount would decrease accordingly.

Changes from the 2017 Tax Cuts and Jobs Act (TCJA)

In 2017, the TCJA effectively doubled the individual Exclusion Amount from $5 million to $10 million. Adjusting for inflation, this amount has risen to $13.99 million per individual (or $27.98 million for married couples) by 2025. However, financial analysts forecasted that this increased threshold would ‘sunset’ or revert to approximately $7.2 million per individual at the close of 2025.

How the OBBBA Changes the Game

With the passage of the OBBBA, effective for estates with deaths and gifts made after December 31, 2025, the Exclusion Amount has been raised to $15 million per individual ($30 million for married couples). This increase comes with annual adjustments for inflation, making it a permanent feature of tax law—unlike the TCJA’s previous provisions, which were temporary.

Key Features of the OBBBA:

• Permanent Increase: The new Exclusion Amount is not set to expire, providing long-term estate planning security.
• Inflation Adjustments: Similar to prior legislation, the OBBBA allows for annual inflation indexing, which means your exclusion amount could continue to rise.

Annual Gift Tax Exclusion Remains Unchanged

It’s worth noting that while the OBBBA adjusted the Lifetime Estate, Gift, and GST Tax Exclusion, it did not change the annual Gift Tax Exclusion. Currently set at $19,000 per individual per donee (or $38,000 per married couple per donee), this figure also adjusts annually for inflation. A further increase in 2026 is expected.

Estate Planning Strategies Post-OBBBA

Before the enactment of the OBBBA, individuals with estates exceeding the previous Exclusion Amount rushed to use their remaining exclusions before they diminished at the end of 2025. While the OBBBA now allows more time to utilize these exclusions, it is still advantageous to consider making lifetime gifts.

Here are a few strategies to maximize your gifting benefits:

• Lock in Low-Value Assets: Gifting lower-value assets now may yield substantial future growth that won’t count against your exclusion amount.
• Utilize Discounts During Economic Uncertainty: Economic downturns can provide opportunities for discounted gifting, allowing you to give more value while using less of your exclusion.
• Maximize High-Growth Asset Gains: Gifts made now can grow without accumulating additional taxable estate value, preserving your estate for your heirs.

Consulting Experts: It’s highly advisable to work closely with your estate planning and tax advisors to identify the best strategies tailored to your specific situation.

Conclusion

The One Big Beautiful Bill Act (OBBBA) represents a critical shift in estate tax legislation, offering individuals and families substantial opportunities for estate planning. Understanding how the changes impact the Lifetime Estate, Gift, and GST Tax Exclusion is essential for making informed decisions. Always consult with a professional advisor to build strategies that work for your financial situation.

Stay tuned for potential updates regarding tax laws and consider the new opportunities that the OBBBA presents in your estate planning efforts.