Estate Tax Exemption Made Permanent at $15M: Planning Considerations

What Changed

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, permanently establishing the federal estate and gift tax exemption at $15 million per individual — effectively $30 million for married couples with proper planning. This repealed the sunset provision of the 2017 Tax Cuts and Jobs Act (TCJA), which had threatened to halve the exemption to approximately $7 million at the end of 2025.

Beginning in 2027, the $15 million threshold will be adjusted annually for inflation. The federal estate tax rate remains at 40% for amounts exceeding the exemption.

The Strategic Shift: From Urgency to Optimization

Before the OBBBA, families were racing to execute large gifts before the exemption sunset. That urgency has been eliminated — but it would be a mistake to interpret permanence as a reason to delay planning.

The permanent higher exemption actually creates more planning flexibility, not less. Families now have the luxury of optimizing transfer strategies over longer time horizons rather than executing under artificial deadlines. This is a meaningful advantage for those who think in generational terms.

Key Planning Strategies Worth Understanding

Several wealth transfer mechanisms become particularly relevant in the new landscape:

Lifetime Gifting: The annual gift tax exclusion stands at $19,000 per recipient for 2026. Systematic gifting programs — especially those involving appreciating assets — can meaningfully reduce taxable estates over time.

Trust Structures: Irrevocable trusts, dynasty trusts, and Spousal Lifetime Access Trusts (SLATs) remain powerful tools for removing assets from taxable estates while potentially retaining indirect access to assets.

Business Succession: For business owners, the $15 million exemption provides substantial room for lifetime transfers of business interests, potentially at discounted valuations.

Charitable Strategies: Donor-advised funds, charitable lead trusts, and qualified charitable distributions can simultaneously reduce taxable estates and support philanthropic goals.

These are complex strategies with significant legal and tax implications. They should only be pursued in consultation with qualified legal and tax advisors who understand the family's complete financial picture.

State-Level Considerations

The federal exemption is only one part of the equation. Several states impose their own estate or inheritance taxes with significantly lower thresholds. Families with ties to multiple jurisdictions should review domicile elections and asset siting strategies.

Additionally, state-level tax rules can interact with federal strategies in non-obvious ways. A transfer that is efficient at the federal level may create unintended state-level consequences.

The Bottom Line

The OBBBA's permanent $15 million exemption is welcome news for families of substantial means. It removes the planning distortion caused by the imminent sunset and provides a stable foundation for long-term wealth transfer strategies.

However, permanence in tax law has historically been measured in decades, not centuries. Families who take advantage of today's favorable environment — thoughtfully and with professional guidance — position themselves to weather whatever changes future legislation may bring.