OBBBA boosts estate and gift planning opportunities

The sprawling new tax law dubbed the One Big Beautiful Bill Act includes a number of provisions that present opportunities for accountants and tax professionals to discuss estate and gift planning. 

“There was a lot of anticipation about this bill, both from an estate planning point of view and otherwise,” said Tasha Dickinson, a partner at the law firm Day Pitney in West Palm Beach, Florida. “The Tax Cuts and Jobs Act of 2017 had implemented a $5 million estate and gift tax exemption amount that was set to double to $10 million. Indexed for inflation, in 2025 the exemption amount is $13.99 million per person. What that means is that each person can give away $13.99 million either during their lifetime or at death, and there’s no estate or gift tax implication of that. That was set to sunset as of Jan. 1, 2026, so the exemption amount was going to roll back to $5 million indexed for inflation. While we hadn’t seen an exact number, based on calculations that estate planners had done, the thought was that the exemption was going to be somewhere around $7.23 million per person.”

Under the new tax law, the estate and gift tax exemption is “permanently” set at $15 million per person. 

“I look at this not as a big change when we compare it to current law,” said Dickinson. “It’s more to be viewed as an extension of current law. If we took the $13.99 million and we indexed that for inflation, we probably wouldn’t be at $15 million, but we would be somewhere in the neighborhood of that. The benefit to clients now is that instead of facing an exemption amount of between seven and seven and a half million dollars per person, they’ll have double that in 2026. For clients who are inclined to do planning, the door is still open to do that going forward, whereas what we had feared is that the door was closing.”

Tax pros and their clients may also want to take a fresh look at the generation-skipping transfer tax.

“The generation skipping transfer tax is paired with the estate and gift tax exemption,” said Dickinson. “The GST exemption is moving along with the estate and gift, so the $15 million will also be a generation skipping transfer tax exemption for 2026.” 

That means more opportunities in the future for long-term tax planning for accountants and clients alike, while considering options such as lifetime gifting and trusts. Nevertheless, some taxpayers have opted to move quickly.

“In 2025 a lot of clients have been working to use their exemption for fear that it was going to go away in 2026,” said Dickinson. “Although the urgency of completing these gifts has gone away somewhat, what I found so far is that clients haven’t invested the intellectual capital in structuring these gifts. They have decided to go ahead and do it, notwithstanding the fact that the time pressure isn’t as significant as it was earlier in the year.”

It’s still a good idea to keep planning. “The message is that clients can continue doing the planning that they had been doing before, without worry of a decreased exemption into the foreseeable future,” said Dickinson. “One of the things that we’ve learned with the tax laws, which is more true now probably than ever, is that the tax laws seem to be ever changing, and the concept of permanence is not a good monitor because really the only thing that’s permanent is the constant changes that are happening in the tax laws. The message to clients is, even though you may have a little bit more time, it doesn’t mean that you should shelve the planning that you might otherwise be thinking of doing, because it can all change very quickly.”

Clients should also consider the increase in the cap for the state and local tax deduction, even though it’s only temporary, and there are limitations.

“One of the other provisions that was much talked about in the media was under the Tax Cuts and Jobs Act of 2017 there was a $10,000 cap on deductions for state and local tax called the SALT deduction,” said Dickinson. “Under the new tax bill, that cap is raised to $40,000, but this is a case where I think not everything is maybe as good as it seems because $40,000 is only available for people who have an adjusted gross income of less than $500,000 in 2025 and that gets adjusted every year, but there’s a phase out. For high-income earners, it’s still going to be $10,000, and this is only applicable through 2029 at such time as the SALT deduction goes back to $10,000, so this is kind of a temporary play. This bill is riddled with a lot of carveouts and a lot of temporary measures that may sound good on their face, but may not be as helpful to taxpayers as one might think.”

Another holdover from the TCJA involves opportunity zones, which encourage investment in “economically distressed communities” and now have been made a permanent part of the Tax Code. 

“Opportunity zones are a planning technique where people invest in areas that are compromised, and there are tax incentives for doing that,” said Dickinson. “That has been a popular estate planning strategy. The tax benefit of opportunity zones was set to sunset in 2028 under the Tax Cuts and Jobs Act of 2017. The new tax bill has extended opportunity zones permanently. Opportunity zones were very popular back in 2017 and the years that followed, but now they’ve become less popular because they’re about to sunset. A  lot of that opportunity zone activity has been tapped out in certain areas. Now there’s new life for opportunity zones, and I expect to see renewed activity in that area.”

There has been controversy over the years about whether many of the designated opportunity zones should even qualify for special tax breaks since many were already located in gentrifying areas that were attractive to investors.

“In the new tax bill, there’s some new regulatory guidance about how sites qualify as opportunity zones and their ability to register as an opportunity zone that will cycle every 10 years,” said Dickinson. “But they have met with some controversy based on how they’ve been managed.”

She expects to see more guidance coming on opportunity zones and other parts of the new tax law. 

“I think additional guidance is going to be required on some of the personal income tax provisions of the tax bill,” said Dickinson, pointing to the provisions giving tax exemptions for tips and overtime income. The new “Trump accounts” for providing savings for young children are another example. “There will have to be some more meat around those concepts that are new,” said Dickinson.

It will be up to the Treasury Department and the IRS to draft such guidance, although budget and staffing cuts this year may make that more challenging. 

“The IRS, given its slimmed down budget and workforce, is now having to turn their attention to drafting the regulatory authority around this tax bill, and they’re probably less focused on some of the objectives that they’ve had over the years,” said Dickinson. “The example that comes to mind is for many years, there’s been talk about the IRS curbing the ability for clients to do short-term GRATs [grantor retained annuity trusts], for example. I think that probably it’s all hands on deck right now to deal with what they need to do to implement this tax bill, so I would expect to see a further delay on any authority coming out of the Treasury and IRS on some of these things that we’ve been waiting to get guidance on for some time.”