Understanding the One Big Beautiful Bill Act (OBBBA)

The OBBBA brings significant changes to estate planning. It is essential to grasp these adjustments to navigate your financial future effectively.

Key Changes & Strategic Considerations

1. Legislative “Permanence” Offers Planning Stability

One of the biggest headlines is that the OBBBA was passed through regular order — not via reconciliation. This means many of its provisions are not subject to automatic sunset under the Senate’s Byrd Rule.

In practical terms, that gives estate planners and clients more confidence to adopt longer-term strategies, such as GRATs, SLATs, and dynasty trusts. They can do this without the constant pressure of a looming expiration date. However, permanence doesn’t mean immunity. Future Congresses may still revise or repeal parts of the law.

Takeaway: There’s a window of opportunity in 2025–2026 to front-load planning. This is particularly important for clients in high-tax states or with large estates.

2. Lifetime Exemption & Gift/Estate Tax

Under OBBBA:

• The lifetime exemption for estate, gift, and GST taxes is fixed at $15 million per person (so $30 million per married couple) and indexed for inflation.

• The top tax rate remains at 40%.

  
  

Because the exemption is now “locked in,” many of the strategies that were already in favor (GRATs, SLATs, sales to intentionally defective grantor trusts or “IDGTs”) continue to be powerful tools in wealth transfer planning.

Takeaway: Clients with large estates should evaluate whether to accelerate transfers now while the favorable exemption is assured (at least for the moment).

3. Annual Gift Tax Exclusion Increases

The OBBBA retains the annual gift tax exclusion but increases it. For 2025, the exclusion is set at $19,000 per donee.

This higher exclusion means you can make more tax-free gifts each year without touching your lifetime exemption.

Takeaway: Review your gifting program. Consider whether you should increase the frequency or size of your gifts to children, grandchildren, or other beneficiaries.

4. Portability & GST Exemption

OBBBA keeps alive portability. This means that a surviving spouse can use the deceased spouse’s unused estate/gift tax exemption. However, GST (generation-skipping transfer) exemption is *not* portable.

This means you must still allocate GST exemption carefully (during life or at death) to ensure tax-efficient transfers across generations.

Takeaway: Married couples should still plan to fully use portability. However, for dynasty and legacy goals, proactive GST planning remains essential.

5. Expanded SALT Deduction + Trust “Stacking”

A new (though temporary) feature: starting in 2026, the OBBBA raises the state and local tax (SALT) deduction cap to $40,000 for married filers ($20,000 for singles), phased out at higher incomes.

Crucially, this expansion enables advanced planning techniques, notably trust stacking. This involves establishing multiple nongrantor trusts (each a separate taxpayer) that can each separately take the SALT deduction. By stacking several such trusts, one potentially “multiplies” the deduction.

However, the law itself provides that the SALT increase is temporary. It will revert back to $10,000 by 2030. Aggressive trust stacking strategies may draw IRS scrutiny under doctrines like Substance-Over-Form or Step Transaction. Careful structuring and documentation are essential.

Takeaway: For clients in high-tax states, trust stacking may offer material tax relief. However, it must be done thoughtfully and while the expanded SALT cap window lasts.

6. Charitable Giving Rules

OBBBA codifies the 60% of AGI limit for cash contributions to qualified charities, making it permanent. At the same time, it introduces a 0.5% AGI floor. This means only the portion of charitable gifts exceeding 0.5% of AGI will be deductible.

Because of this floor, strategies like “bunching” (grouping multiple years of charitable giving into one tax year) may be more attractive. Donor-advised funds (DAFs) may also play a bigger role, giving flexibility in timing grantmaking.

Takeaway: Review your charitable giving approach. Bunching or pre-funding DAFs may help you optimize deductibility under the new rules.

7. Private Foundations Largely Unchanged

Private foundations see no major structural changes under OBBBA:

• The 1.39% net investment income (NII) excise tax remains unchanged.

• No new compliance burdens were added.

  
  

Given the now-firm lifetime exemption, many high-net-worth individuals may see renewed incentive to use private foundations as vehicles for legacy giving and multigenerational philanthropy.

Takeaway: Foundations remain a stable, viable tool in estate and philanthropic planning.

Strategic Action Steps (2025–2026)

1. Update existing estate plans to reflect the new rules — especially trusts drafted under older law assumptions.

2. Front-load planning for clients with large estates, given the increased certainty now that the exemption is locked in.

3. Evaluate trust stacking strategies in high-tax states while the SALT window is open.

4. Reassess gifting and charitable strategies, including bunching and donor-advised funds.

5. Given the political risk, move prudently and decisively. Legislative stability today doesn’t guarantee permanence forever.

   
   

Final Thoughts

The OBBBA represents a meaningful shift. It anchors favorable estate planning parameters in place and opens new opportunities, especially for high-net-worth individuals and those in high-tax jurisdictions. However, these changes also come with timing pressures and compliance risks.

For those with significant estates, the years ahead (especially 2025–2026) offer a unique window to revisit legacy plans, lock in benefits, and adopt more sophisticated strategies with confidence. As always, the optimal approach depends on individual financial, tax, and personal goals. Therefore, consult with your advisors to chart the best path forward.

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