Navigating the Key Estate Planning Changes of the One Big Beautiful Bill Act
The “One, Big, Beautiful Bill Act” (“OBBBA”) was signed into law on July 4, 2025. The OBBBA includes provisions that affect estate and gift taxes, mainly by extending the 2017 Tax Cuts and Jobs Act (“TCJA”).
Federal Lifetime Gift, Estate, and Generation-Skipping Transfer Tax Exemption
Beginning January 1, 2026, OBBBA permanently increases the lifetime gift, estate, and generation-skipping transfer tax exemption to $15 million per person, to be adjusted annually for inflation (the exemption amount for 2025 is $13.99 million per person). Despite this change in federal law, several states still levy a separate estate (Maine, Vermont, New York, Massachusetts, Rhode Island, Connecticut, Maryland, Illinois, Minnesota, Washington, Oregon, and Hawaii) or inheritance (Pennsylvania, New Jersey, Maryland, Kentucky, Iowa, and Nebraska) tax. Illinois has an estate tax exemption of $4 million per person.
The new law provides a level of certainty to families since the prior increased exemptions were set to decrease at the end of 2025.
Even with these increased exemptions, wealthy individuals and families will need to continue to engage in high-quality planning, which may shift more assets into irrevocable trusts to minimize future estate taxes for the family and provide asset protection. For example, a gift of $15 million to an irrevocable grantor trust (meaning the person creating the trust pays the income taxes) in 2026 could potentially shift over $60 million out of the grantor’s estate (over 30 years, assuming a 6% growth rate). This is a very powerful estate planning tool. Even after an initial gift is made, estate planning practitioners utilize a variety of tools, like sales of interests, to continue shifting more assets into the irrevocable trust and out of the grantor’s taxable estate. At its core, the purpose of estate planning is to, in fact, craft how future descendants will be able to hold and access trust assets. The OBBBA does not change this aspect; given such potential growth, proper planning is not just beneficial but imperative to preserve and protect family assets from creditors.
529 Plans
In addition to the changes in the exemptions, the OBBBA made permanent certain changes to 529 plans introduced in the TCJA, which allowed for contributions to 529 plans to be used for elementary or secondary school; however, state rules are still in effect, and many states have not updated their own tax codes to allow for the use of 529 plans for these purposes. Individuals should consult with their tax advisor before withdrawing from 529 plan accounts.
Qualified Small Business Stock Exclusion
Finally, the OBBBA made changes to Qualified Small Business Stock (“QSBS”) exclusion from income tax, which is designed to encourage investment in new start-up companies. To qualify, the stock must be acquired directly from a domestic C corporation. Under prior law, the corporation needed to have gross assets of $50 million or less when the stock was issued. The OBBBA increased this threshold to $75 million or less. At least 80% of the corporation’s assets must be used in an active qualified business. For stock held for at least four years, the percentage of gain excluded from gross income increased from 50% to 75%. If the stock is held for five years or more, the exclusion is 100%. The OBBBA increased the exclusion amount from $10 million to $15 million. It is unclear whether these apply retroactively or only to future grants of stock.
The OBBBA brings significant changes to estate and gift taxes, making permanent the increased lifetime exemptions and enhancing the benefits of QSBS exclusions. Despite these changes, high-quality estate planning remains essential for wealthy individuals and families to minimize future estate taxes and protect assets. Overall, the OBBBA provides more certainty and opportunities for strategic financial planning, but consulting with your advisors is crucial to navigate the complexities and maximize the benefits.
Wondering how the OBBBA might affect your estate plan? Contact Steven Kriz or another member of LP’s Trusts & Estates group.