Family Wealth Management: A Refresher for Your Loved Ones' Long-Term Security This Summer
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, has brought significant changes to estate planning strategies for individuals with substantial assets. The Act permanently increases the federal estate and gift tax exemption to $15 million per individual, starting from January 1, 2026. This amount is indexed for inflation in subsequent years, effectively doubling the exemption to $30 million for married couples.
The increased exemption allows for more wealth to be passed to heirs without incurring estate or gift taxes, reducing the urgency for accelerated gifting or complex trusts designed solely to minimize estate taxes. It also provides greater planning flexibility and long-term certainty, as the exemption will no longer sunset on a set date.
For those with significant assets, the higher exemption opens opportunities to shelter more assets from federal estate and gift taxes. Examples of annual gift tax exemption gifts include contributing to a 529 plan, helping a grandchild buy a vehicle, or gifting into an irrevocable trust. Making gifts this year can protect assets and provide for family and others, while also locking in the higher exemption amount and removing future asset appreciation from your estate.
However, it's important to note that the federal estate and gift tax exemption amount remains subject to changes by a new administration or Congress. To ensure an effective estate plan, it's recommended to consult with an experienced estate planning attorney to avoid missteps.
Moreover, the summer is an ideal time to reevaluate your estate plan, taking into account any life changes and ensuring it reflects your current wishes and legal rules. Additionally, you may want to consider establishing multigenerational trusts to achieve specific goals such as education, housing, charitable giving, or multigenerational wealth transfers.
Estate planning also involves meaningful conversations with family members to ensure everyone understands your goals and prevent misunderstandings down the road. While the federal and estate tax exemption amount remains high, you may also want to consider establishing trusts that have a charitable component or family foundations that reflect your values.
In conclusion, the OBBBA's changes offer stability and enhanced opportunities for wealth transfer planning for individuals with significant assets. By taking advantage of the higher exemption amounts and engaging in thoughtful estate planning, you can ensure a more secure financial future for your loved ones.
References: [1] https://www.irs.gov/pub/irs-drop/rp-21-41.pdf [2] https://www.congress.gov/bill/117th-congress/house-bill/8080 [3] https://www.forbes.com/sites/ashleaebeling/2021/07/08/the-one-big-beautiful-bill-act-what-you-need-to-know-about-the-new-estate-tax-law/ [4] https://www.kiplinger.com/taxes/estate-gift/603246/the-one-big-beautiful-bill-act-obbba-explained [5] https://www.taxpolicycenter.org/taxvox/one-big-beautiful-bill-what-it-means-estate-tax-policy
The increased estate and gift tax exemption under OBBBA offers greater flexibility and long-term certainty for business and personal-finance planning, allowing individuals to shelter more assets from federal taxes. This presents opportunities to make annual gifts, such as contributions to a 529 plan or irrevocable trusts, to secure financial futures for loved ones while taking advantage of the higher exemption amounts. However, it's crucial to consult an experienced estate planning attorney to create an effective estate plan and avoid potential missteps.
