The recently signed “Big Beautiful Bill” introduces significant changes impacting the tax landscape for individuals, trusts, and estates. Here’s an overview of the key provisions now in law.
Let’s focus specifically on how this Act may affect your current estate plan and what, if any, changes you might consider making to it in the near future.
Federal Estate and Gift Tax Exemptions Made Permanently Higher
The Act establishes permanent increases to federal estate and gift tax exemptions, building on the Tax Cuts and Jobs Act framework. While the 2025 exemption remains at $13.99 million per person, the legislation sets a new foundation starting in 2026 with a $15 million per-person exemption that will grow annually with inflation adjustments.
This represents a fundamental shift in estate tax policy. The Act creates a new baseline of $15 million for calculating future inflation increases, replacing the previous structure that would have reverted to lower exemption levels. Unlike temporary provisions that include sunset clauses, this change contains no expiration date and can only be reversed through new legislation requiring approval from both Congress and the President.
The permanent nature of these higher exemptions provides estate planning certainty for wealthy families and their advisors, eliminating the previous uncertainty about whether exemption levels would drop significantly in future years.
Impact and Benefits of the Permanent Exemption Increase
The Act addresses a significant concern that had been looming over estate planning. According to the National Law Review, without this legislation, the federal estate tax exemption would have reverted on January 1, 2026, to pre-TCJA levels of approximately $5 million per person (adjusted for inflation), which estate planners estimated would have been around $7.2 million per person. The Act eliminates this cliff and locks in higher exemption levels indefinitely.
The practical effect is substantial tax savings for wealthy families. The federal lifetime exemption functions like a transferable credit that individuals can apply against gifts made during their lifetime or assets transferred at death. Each person can shelter up to their exemption amount from federal transfer taxes, with any excess subject to a 40% tax rate.
Under the new permanent structure, a married couple can collectively shield up to $30 million from federal estate and gift taxes starting in 2026. This represents more than double what the exemption would have been under the previous sunset provisions. For families with substantial wealth, this translates to potentially millions of dollars in tax savings and significantly more assets passing to beneficiaries rather than to the federal government.
The certainty provided by making these exemptions permanent also allows for more confident long-term estate planning strategies, as families no longer need to plan around potential dramatic reductions in available exemptions.
Evaluating Changes to Your Estate Planning Strategy
Core estate planning remains essential regardless of these tax changes. The Act doesn’t alter the fundamental need for basic estate planning documents such as wills, powers of attorney for financial and healthcare decisions, and revocable trusts. These tools continue to serve vital purposes, including asset protection, probate avoidance, and establishing clear directives for incapacity and death.
However, the higher permanent exemptions do create new opportunities for strategic wealth transfer. Individuals who have already utilized significant portions of their current exemption through previous gifts will gain additional capacity in 2026, with the ability to transfer up to $15 million per person tax-free. This expanded exemption space makes lifetime gifting strategies more attractive, as gifts remove both the current asset value and all future appreciation from the taxable estate while preserving exemption capacity.
For those considering substantial gifts, irrevocable trusts offer enhanced benefits beyond simple direct transfers. These structures provide additional asset protection and can be designed to optimize income tax efficiency across generations while maintaining the transfer tax advantages.
While the elimination of the 2025 sunset deadline removes immediate pressure, wealthy families shouldn’t assume unlimited time for planning. Tax laws remain subject to political changes, and other factors such as state estate tax considerations, family circumstances, and market conditions may create their own timing considerations. High net worth individuals should work with their advisors to evaluate whether current strategies align with the new permanent exemption landscape.
