OBBBA Permanently Raised the Estate Tax Exemption to $15M Per Individual

#What the estate + gift exemption actually is

The federal estate tax applies to transfers of wealth at death above the lifetime exemption amount. The same exemption pool covers lifetime gifts above the annual exclusion ($18K per recipient in 2024, $19K in 2025).

A married couple gets two exemptions ($30M total under post-OBBBA rules) plus portability — meaning the surviving spouse can use any unused portion of the first spouse’s exemption.

Above the exemption, the federal estate tax rate is 40%. Below it, no federal estate tax (some states have their own estate or inheritance taxes with lower thresholds).

For most ETS clients, the estate tax doesn’t apply at death. But for households with $5M-$30M+ net worth, the planning matters significantly.

#What changed

#The pre-OBBBA picture

Under TCJA (2017), the estate exemption was doubled to ~$11.18M per individual in 2018 and indexed for inflation. By 2025 it reached $13.99M per individual ($27.98M MFJ).

The TCJA doubling was scheduled to sunset on December 31, 2025, automatically reverting the exemption to approximately $7M per individual (the pre-TCJA $5M, indexed for inflation through 2025).

This sunset created the dominant estate-planning conversation of 2023-2025: “use it or lose it.” Households with $7M-$14M of net worth raced to make lifetime gifts before the exemption dropped, sometimes gifting tens of millions of dollars into trusts to “lock in” the higher exemption.

#What OBBBA did

OBBBA, signed July 4, 2025, did three things:

1. Permanently increased the exemption to $15 million per individual ($30M MFJ), effective January 1, 2026
2. Eliminated the sunset provision — the exemption no longer reverts
3. Continued annual inflation indexing — exemption grows each year going forward

For 2026 (the first year under new rules), the exemption is $15M per individual. For 2027 onward, it’s indexed annually for inflation (typical CPI growth ~2-3%/year would put the exemption around $15.5M in 2027 and $16M in 2028).

#What this means for ETS clients

How the new exemption lands depends entirely on where your household sits. Here’s the outcome under OBBBA by wealth band:

#For households with under $5M net worth

The estate tax was never going to apply to you. OBBBA doesn’t change your planning materially. Continue normal estate documents (will, durable power of attorney, healthcare directive), beneficiary designations, and revocable living trust if your state benefits from one for probate avoidance.

#For households with $5M-$15M net worth

You’re in the most-affected zone. Pre-OBBBA, you faced a real possibility of estate tax exposure when the exemption dropped to ~$7M at end of 2025. Now, with the exemption at $15M+ per individual, most $5-15M households have zero federal estate tax exposure for the foreseeable future.

Specific planning moves to revisit:

• “Use it or lose it” gifts you made in 2024-2025: Those gifts are still valid and consumed exemption you didn’t need to use. The gifted assets are now outside your estate but you’ve already used the exemption. Generally not undoable.
• Irrevocable Life Insurance Trusts (ILITs): still useful for life insurance proceeds, but the urgency dropped. Premiums can continue or pause based on overall plan.
• Annual exclusion gifting ($19K per recipient in 2025): still useful for chipping away at the estate over time, especially for households heading toward the exemption.

#For households with $15M-$30M net worth

This zone gets meaningful relief from OBBBA. A married couple at $25M net worth had material federal estate tax exposure pre-OBBBA ($25M - $14M MFJ = $11M taxable at 40% = $4.4M estate tax). Post-OBBBA at $30M MFJ exemption, that same household has zero exposure.

Planning moves to consider:

• Re-evaluate Spousal Lifetime Access Trusts (SLATs) you may have established for “lock in” purposes. The trusts are still valid but the urgency is gone.
• Generation-skipping transfer (GST) tax planning — the GST exemption follows the same $15M/$30M permanent structure. Plans for tax-efficient multi-generational wealth transfer can plan with stability.
• Continue annual exclusion gifting + 529 superfunding as efficient ways to move wealth without using exemption.

#For households with $30M+ net worth

You’ll still face estate tax exposure. OBBBA reduced the bite but didn’t eliminate it. The planning techniques (irrevocable trusts, Grantor Retained Annuity Trusts (GRATs), Charitable Lead Trusts (CLTs), family limited partnerships, valuation discounts) all still apply.

The change for you: the time horizon for the planning is now longer because the exemption is permanent (vs. scheduled to drop). Multi-decade strategies that assumed periodic re-engagement to capture new exemption ceiling now have stability.

#What about state estate taxes?

OBBBA only changed federal law. Several states have their own estate or inheritance taxes with lower thresholds:

• Connecticut, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington, Hawaii, Illinois, District of Columbia all have state-level estate taxes with thresholds ranging from $1M (Oregon) to $13.6M (Connecticut)
• Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania have inheritance taxes (paid by the heir, not the estate)
• Texas, Florida, and most western/southern states have no state estate tax

For Texas-resident ETS clients, only federal estate tax applies. For clients in or moving to states with state-level estate taxes, the state thresholds (often much lower than federal) create planning needs independent of federal exemption changes.

#Common planning moves under post-OBBBA rules

For most ETS-client households in the $5M-$30M wealth range, the post-OBBBA estate planning baseline:

1. Document the basics. Will + durable power of attorney + healthcare directive + HIPAA authorization. Revocable living trust if state-level probate avoidance benefits.

2. Beneficiary designations everywhere. Retirement accounts (401(k), IRAs, Roths) bypass the estate and go directly via beneficiary forms. Same with life insurance and annuities. Annual review.

3. Annual exclusion gifting (where appropriate). $19K per recipient per donor per year (2025), no exemption used. For households heading toward the exemption ceiling, this is the slow drip that avoids estate tax buildup.

4. 529 plan superfunding (where there are kids/grandkids). Front-load 5 years of annual exclusion gifts into a 529 plan ($95K per beneficiary per donor in 2025). Removes from estate, tax-free growth, education-targeted.

5. Trust planning for $15M+ wealth. Irrevocable trusts (SLATs, dynasty trusts, life insurance trusts) for households approaching or above the exemption. Coordinated with the estate attorney.

6. Charitable giving plan (if philanthropic). Donor-Advised Funds, Charitable Remainder Trusts, Charitable Lead Trusts, direct gifts of appreciated assets. Income tax + estate tax + impact benefits aligned.

#What we do when you engage

ETS doesn’t provide legal estate planning services — that requires an estate attorney. What we DO provide:

• Tax-side analysis of estate planning structures — modeling federal + state estate tax exposure under the post-OBBBA rules
• Coordination with your estate attorney — ensuring tax positions align across the estate plan, business entities, retirement accounts, and personal returns
• Annual income + gift tax filings — Form 709 gift tax returns when annual exclusion is exceeded or substantial trusts are funded
• Cross-disciplinary planning — your estate plan should coordinate with your business plan, retirement plan, and tax strategy

For ETS-Strategic-tier clients, estate-side coordination is standard. Estate attorney referrals to specialists in our network when needed.

#Common questions

When does the $15M exemption take effect? January 1, 2026. The 2025 exemption was $13.99M per individual. Effective 2026, $15M per individual indexed for inflation.

Is OBBBA’s estate exemption truly permanent? Legally permanent — meaning no scheduled sunset. Politically, a future Congress could change it. Plan with the assumption it’s stable for the next decade-plus but understand that tax law is ultimately a political construct.

What if I made large gifts in 2024-2025 anticipating the sunset? The gifts are valid and the exemption you used is gone. The gifted assets are now outside your estate, which was the intended outcome. Whether you “should have” used the exemption depends on your overall wealth picture and the alternative uses of that exemption.

Can I still do a SLAT (Spousal Lifetime Access Trust)? Yes. SLATs are still valid post-OBBBA. The urgency for “lock in” SLATs is much lower, but the technique itself remains useful for couples wanting to move assets out of their estate while preserving spousal access.

Does OBBBA change the GST tax exemption? The Generation-Skipping Transfer tax exemption follows the same structure — permanently raised to $15M per individual ($30M MFJ) effective 2026, indexed for inflation.

What about the step-up in basis at death? Unchanged by OBBBA. Heirs still receive a step-up in basis at death (or in some cases an election under Section 2032). This is the most-significant remaining estate planning advantage for households where the federal estate tax doesn’t apply.

Should I revoke an irrevocable trust I established for “lock in” purposes? Generally no — irrevocable means irrevocable. The trust assets are out of your estate (good) but also out of your control. Consult with your estate attorney about possible modification under decanting statutes or trust protector provisions.

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If you have $5M+ net worth and haven’t reviewed your estate plan since OBBBA, the Discovery call is the right starting point. We coordinate with your estate attorney + handle the tax-return + gift-tax-return side of the planning.