The One Big Beautiful Bill (OBBB) brings several important changes for individuals and families looking to transfer wealth, reduce estate taxes, and protect assets for future generations. Whether you’re planning modest gifts to family or multi-million-dollar legacy transfers, these updates could impact your strategy.
🏛 Current Estate & Gift Tax Basics
- Unified Credit (Exemption): The total amount you can transfer during your lifetime and at death without paying federal estate or gift tax.
- Gift Tax Annual Exclusion: The amount you can gift to each individual annually without reducing your lifetime exemption.
- Tax Rate: Federal estate and gift tax rate remains 40% for amounts above the exemption.
🆕 OBBB Estate & Gift Updates
1️⃣ Increased Lifetime Estate & Gift Tax Exemption
- Pre-OBBB (2024): $13.61M per person ($27.22M per married couple).
- Post-OBBB: Increases the exemption to $15M per person ($30M per married couple), indexed for inflation.
- This allows an additional $1.39M per person to be transferred tax-free.
2️⃣ Higher Annual Gift Tax Exclusion
- Pre-OBBB (2024): $18,000 per recipient.
- Post-OBBB: $20,000 per recipient, indexed for inflation.
- This means a married couple can gift $40,000 annually to each child, grandchild, or other recipient without touching their lifetime exemption.
3️⃣ Portability Simplified
- Surviving spouses can automatically elect portability of unused exemption without having to file a full estate tax return, provided the estate is under the filing threshold.
- This change removes an administrative headache and helps preserve exemptions for later transfers.
4️⃣ Generation-Skipping Transfer (GST) Tax Alignment
- GST exemption matches the new lifetime exemption ($15M per person).
- This is important for trusts benefiting grandchildren and future generations.
5️⃣ Clarity on Family Business Transfers
- The OBBB clarifies valuation rules for family-owned businesses to prevent IRS disputes.
- Minority interest and lack-of-marketability discounts remain available if structured properly.
📊 Estate & Gift Tax Comparison
|
Feature |
Pre-OBBB Rules (2024) |
Post-OBBB Updates |
|
Lifetime Exemption |
$13.61M |
$15M |
|
Annual Exclusion |
$18,000 |
$20,000 |
|
GST Exemption |
$13.61M |
$15M |
|
Portability Election |
Requires filing Form 706 |
Automatic for smaller estates |
|
Family Business Discounts |
Allowed, but disputed |
Clarified & preserved |
📈 Example – Multi-Generational Gifting
Before OBBB: A married couple could gift $36,000 to each of their 5 grandchildren = $180,000/year tax-free.
After OBBB: That same couple can now gift $40,000 to each = $200,000/year tax-free, plus they have an extra $2.78M in lifetime exemption available.
👥 Who Should Pay Attention?
- High-net-worth individuals and families concerned about estate taxes.
- Small business owners wanting to pass businesses to children or grandchildren.
- Parents & grandparents making annual gifts to reduce taxable estates.
- Trust beneficiaries and trustees managing multi-generational wealth.
📌 Action Steps Before Year-End
- Review current gifting strategy—increase annual exclusion gifts to $20,000 per recipient.
- Evaluate lifetime exemption usage—consider large gifts before potential future law changes.
- Leverage family business discounts—update valuations now for planned transfers.
- Update estate documents—align wills, trusts, and beneficiary designations with OBBB rules.
- Discuss portability—ensure your spouse can take full advantage of unused exemption.
✅ Bottom Line
The OBBB gives you more room and flexibility to transfer wealth tax-free, but these provisions can change with future legislation. Planning now could secure significant tax savings and ensure your legacy passes smoothly to the next generation.
