Big Changes to the Estate Tax: What the One Big Beautiful Bill Means for Your Estate Plan

The estate tax has long been a central topic in U.S. tax law, facing many changes under various acts and bills, including the Tax Cuts and Jobs Act (TCJA), and, most recently, the One Big Beautiful Bill Act (OBBBA), which was signed into law on July 4, 2025.

For high-net-worth individuals and families, the latest changes bring not just welcomed news, but also important shifts that could impact how you protect and transfer your wealth.

Why These Changes Matter Right Now

The OBBBA’s new tax provisions take effect in 2026, making now a great time to review your estate plan and gifting strategies. Updating your plan can help ensure you benefit from the higher exemptions and avoid unintended tax issues.

The IRS has increased the annual gift tax exclusion for inflation, allowing you to transfer more each year tax-free and further reduce your taxable estate. Acting soon can help maximize your tax savings and protect your legacy.

Key Changes Introduced by the One Big Beautiful Bill

Estate Tax Exemption Sees a Big Jump

Among the major estate and gift tax provisions in the OBBBA, the increase in the estate tax exemption is especially impactful. For tax years beginning January 1, 2026, the exemption rises to $15 million per individual (up from about $13.99 million) and $30 million for married couples (up from roughly $27.98 million), with inflation adjustments beginning in 2027.

This increase is considered permanent, unlike the TCJA’s temporary boost that was set to expire at the end of 2025. For now, this permanence provides long-term certainty. However, “permanent” comes with a caveat, as future legislative changes could alter the exemption amounts.

The higher exemption means that fewer estates should be subject to federal estate tax going forward.

Important note: The current IRS estate tax rates will remain the same under the OBBBA. Once the exemption amount is exceeded, the taxable estate is subject to a graduated tax schedule ranging from 18% to 40%.

Gift and Estate Tax: Unified, and Higher Than Ever

A key component of the OBBBA reform is the unification and increase of the gift and estate tax exemptions, working together to give families greater flexibility in transferring wealth both during their lifetimes and at death.

For 2025, the annual gift tax exclusion rose from $18,000 to $19,000 per recipient, allowing individuals to gift more each year tax-free without reducing their lifetime gift and estate tax exemptions.

These increases translate into meaningful tax savings and enhanced flexibility for wealth transfers. For example, a married couple can now transfer up to $30 million—during their lives or at death—free of federal gift and estate taxes, while gifting up to $19,000 annually to as many recipients as they choose without incurring gift tax. If a married couple agrees to split gifts, they can give a combined $38,000 per recipient.

Additionally, the generation-skipping transfer (GST) tax exemption was increased alongside the estate and gift tax exemptions and is aligned with these higher amounts under the OBBBA, subject, of course, to the same potential future legislative changes.

What Does This Mean for Estate Planning?

Simplified Estate Planning for Most

With a $15 million estate tax exemption per individual and $30 million exemption per married couple, many high-net-worth families will not need to worry about federal estate tax. This may make many complex estate planning strategies previously needed to avoid hefty taxes less relevant.

State and Local Estate Tax: Still a Concern

Some states (including many in the Northeast) still have their own state estate or inheritance taxes, often with exemptions much lower than the new federal levels. If you reside in one of these states, your estate plan should still account for these lower exemption amounts and potential tax liabilities.

Review Your Estate Planning Documents

Because older plans are often tied to outdated exemption amounts, it is important to review your existing estate plan to make sure you aren’t accidentally over-funding trusts or missing out on new tax opportunities created by the Big Beautiful Bill. Revisiting your planning documents can help ensure your wishes match today’s higher exemption and the law’s new transfer tax exemptions. 

If you want to discuss how the OBBBA may impact your current estate plan, connect with a NEPWA advisor today. We can work alongside your estate attorney to review and optimize your strategy for your unique financial goals.