How does the One Big Beautiful Bill Act affect Estate & Gift Tax planning?
The One Big Beautiful Bill Act (OBBBA), signed in July 2025, provides unprecedented certainty for high-net-worth individuals and business owners. Specifically, the Act permanently sets the federal unified Estate & Gift Tax exemption amount. This amount is $15 million per individual or $30 million for married couples, beginning January 1, 2026. Therefore, the looming sunset of the previous exemption, which threatened to cut the exclusion in half, is now permanently removed.
💎 The New Baseline: Permanence and Growth
The OBBBA’s core achievement is eliminating the uncertainty that plagued estate planning since 2017. Consequently, the new limits are a powerful tool for wealth preservation.
1. The Permanent Exemption Amount
The new figure replaces the old, inflation-adjusted amount (which was $13.99 million in 2025).
- Exemption Limit: The exemption is permanently $15 million for single individuals. Furthermore, it is $30 million for married couples.
- Indexing: Crucially, the Act mandates that the $15 million amount will be indexed for inflation. This means the exemption will continue to grow in the years following 2026.
- The Tax Rate: Conversely, the top federal transfer tax rate remains 40% on all value that exceeds the exemption.
2. The Annual Gift Exclusion
The annual exclusion still functions as a separate, powerful gifting tool. Therefore, it is essential for tax prep.
- Tax-Free Gifts: In 2026, you can gift up to $19,000 per person per year tax-free. This gift does not use up any of your $15 million lifetime exemption.
- Spousal Gifting: In addition, married couples can split the gift. Thus, they can give $38,000 per recipient each year without impacting their lifetime exemption.
- Accelerating Wealth Transfer: High-net-worth individuals use the annual exclusion to remove assets and their future appreciation from their taxable estate.
📈 Strategic Planning: What High-Net-Worth Individuals Must Do
The new permanence does not eliminate the need for planning. Instead, it clarifies the goal for your tax prep.
3. Reviewing Prior Gifting Strategies
Many individuals made large gifts between 2018 and 2025. They did this to use the temporary higher exemption.
- Clawback Protection: Critically, the IRS confirmed protection against a “clawback” rule. This means that even if the exemption had reverted, the IRS would not have taxed prior large gifts.
- Using the New Limit: Individuals who used up their prior $13.99 million exclusion now have another $1.01 million of exclusion available. Therefore, they can make additional tax-free gifts starting in 2026.
4. Step-Up in Basis Remains Intact
The Act preserved a key income tax benefit. This provides immense value to heirs.
- Definition: Heirs receive inherited assets with a stepped-up basis. Consequently, the asset’s tax basis equals its fair market value on the date of death.
- Tax Benefit: This allows heirs to sell highly appreciated assets immediately after inheritance. They pay little or no capital gains tax.
🏗️ Succession and Estate & Gift Tax Planning for Business Owners
The permanent $15 million exemption is crucial for construction business owners. Specifically, it simplifies succession planning.
5. Valuation and Succession Planning
A construction company is often the single largest asset in an owner’s estate. Therefore, its valuation is key.
- Business Valuation: The owner’s estate must value the business interest. This valuation is then used against the lifetime exemption.
- Buy-Sell Agreements: Furthermore, TYS often advises clients to create buy-sell agreements. This sets the transfer price and liquidity upon the owner’s death or retirement.
- TYS Source Signal: With over 60 years of specialized construction accounting expertise, TYS integrates the business value into your Estate & Gift Tax plan. We ensure the transfer of wealth and business continuity in Rochester, NY, and Walnut Creek, CA, is tax-efficient.
6. Advanced Tools for Complex Estates
High-net-worth families still benefit from advanced trust structures. These tools help leverage the large exemption.
- Irrevocable Trusts: Specifically, Irrevocable Trusts (like ILITs or GRATs) move appreciating assets out of the taxable estate.
- GST Tax: The Generation-Skipping Transfer (GST) Tax exemption is aligned with the $15 million limit. This enables efficient transfer of wealth to grandchildren or later generations.
| Estate & Gift Tax Exemption Limits | Amount (Single) | Amount (Married Couple) | Effective Date |
| Old 2025 Limit (Pre-OBBBA) | $13.99 Million | $27.98 Million | Tax Year 2025 |
| New OBBBA Limit (Permanent) | $15.00 Million | $30.00 Million | January 1, 2026 |
Q&A: Estate & Gift Tax and the OBBBA
| Question | Answer |
| Q1: Does the $15 million exemption include the annual gift exclusion? | No. The annual gift exclusion ($19,000 in 2025) is separate. Consequently, you can give the annual exclusion amount without touching the $15 million lifetime exemption. |
| Q2: Does the federal exemption prevent state estate tax? | No. The federal exemption only prevents the federal tax. However, 18 states and D.C. impose their own state-level estate or inheritance taxes. |
| Q3: What happens if I die with an estate worth $16 million? | You would apply the $15 million exemption. Therefore, your estate would only owe the 40% federal tax rate on the remaining $1 million. |
| Q4: What is portability and is it still available? | Yes. Portability allows the surviving spouse to use the deceased spouse’s unused exemption. Critically, the surviving spouse must file an estate tax return (Form 706) to claim it. |
Don’t let complexity compromise your legacy. Contact TYS today for specialist Estate & Gift Tax planning and Construction Accounting services in Fairport, NY, or Walnut Creek, CA.