The “One Big Beautiful Bill” (OBBB), signed into law on July 4, 2025, represents the most sweeping tax reform since the Tax Cuts and Jobs Act (TCJA). While the legislation spans hundreds of pages, individual taxpayers need to be aware of key changes regarding estate and gift tax planning that will impact them.

Summary of OBBB Changes

Prior to the TCJA, the basic estate and gift tax exclusion was $5M. The TJCA temporarily increased this amount to $10M, but the increase was scheduled to expire at the end of 2025. Under the OBBB, the basic estate and gift tax exclusion is permanently increased to $15M, effective for gifts made and decedents dying after 2025. The $15M amount will also be adjusted for inflation going forward.

The permanent increase in the estate and gift tax exclusion will allow for greater certainly in estate planning, since taxpayers will no longer have to make contingency plans in the event of the expiration of the higher exclusion amount.  

Taxpayers and tax preparers should take the following items under advisement:

• Review wills and estate plans; coordinate tax planning with legal counsel where needed.

• If the taxpayer’s spouse is a non-citizen and non-resident, be aware of the significantly lower limits that apply to gifts made to such spouses.

• Make sure that intended heirs/beneficiaries are of legal age and sound judgment to handle any inherited assets; set up trusts or contingency plans as needed.

• Make sure to have a good understanding of the current value of all assets, including real estate, business interests, collectibles, and other non-cash items – and how the value of their assets compares to the available $15M exclusion.

• For married taxpayers, be aware of the “portability” option to transfer one spouse’s unused exclusion amount to their surviving spouse.

• Be aware of tax-free avenues to transfer wealth during taxpayers’ lifetimes, such as direct payment of higher education expenses, direct payment of medical expenses, and the annual exclusion which is available for smaller gifts to an unlimited number of recipients (up to $19K per recipient in 2025).

• Be aware of state estate tax rules and exemptions (several states have their own estate tax systems, with different rules and different exclusion amounts from the federal estate tax system) and how this may impact their estate planning strategy.

• Be aware of avenues for lifetime charitable giving to reduce the taxable estate upon death, such as donor advised funds, conservation easements, and qualified charitable distributions from IRAs.

Contact your YHB advisor today to discuss how these changes can impact you.