On July 4, President Trump signed into law H.R.1. informally known as the “One Big Beautiful Bill Act” (OBBBA) that contains many tax extensions and changes that will have a significant impact on individuals and their tax planning. Included in these changes were the much-anticipated provisions related to the estate, gift, and generation-skipping transfer tax exemptions.
Transfer Taxes in General
The transfer tax system is comprised of three separate taxes: the gift tax, which applies to transfers made during life; the estate tax, which applies to transfers made at death; and the generation-skipping transfer tax, which applies to transfers made to “skip” persons (generally grandchildren).
The gift and estate taxes are considered unified – so there is one exemption that applies to transfers made during life and at death. If the exemption is fully used during life, then any additional transfers made at death will be subject to estate tax. For 2025, the unified exemption is $13,990,000. This means that any one individual can transfer up to this amount during life and/or at death and not owe any gift or estate tax. Any transfers in excess of this amount will generally be subject to tax at a high 40% tax rate, unless the transfer qualifies for the marital or charitable deduction.
The generation-skipping transfer (GST) tax system is separate from the gift and estate tax system, but applies in conjunction with gift and estate taxes when a transfer is made to a “skip” person. A “skip” person is generally defined to include individuals who are two or more generations below the person who is making the transfer. Here’s a practical example:
John and Joan are married and have a daughter, Kara. Kara is married to Alex and has a son, Michael. During 2025, John makes taxable gifts to Kara and Michael of $100,000 each. Assuming that no portion of either gift qualifies for the annual exclusion, John will have used $200,000 of his gift tax exemption, leaving $13,790,000 of his unified exemption remaining. In addition, since Michael is a “skip” person, the gift of $100,000 to Michael will use a portion of John’s GST tax exemption, leaving $13,890,000 of this GST exemption remaining. Since Kara is not a skip person, no portion of her gift is subject to GST tax, and therefore no exemption is applied.
The Tax Cuts and Jobs Act of 2017
Prior to the passage of the Tax Cuts and Jobs Act (TCJA) in 2017, the gift, estate, and GST exemptions were equal to $5 million plus inflation. The TCJA doubled the exemption to $10 million plus inflation, and changed the inflation calculation. The doubled exemption was set to expire in 2026, which would have resulted in a decrease to the unified gift and estate exemption, and the GST exemption, to approximately $7.14 million.
The ”One Big Beautiful Bill Act” Increase
The OBBBA now permanently increases the gift, estate, and GST exemptions imposed by the TCJA, and further increases the exemption to $15 million, increased by inflation. This results in a unified and GST exemption equal to $15 million for the 2026 tax year, and will continue to increase the exemption by inflation for each year thereafter.
What Impact Will This Have on Planning?
The increased exemption is particularly helpful for small business owners and individuals holding significantly appreciated homes and retirement accounts. Over the past 10+ years we have seen significant growth in the market and in real estate, potentially pushing more individuals into a taxable estate. This increased exemption will allow many Americans to avoid gift, estate, and GST taxes, maximizing the value they can pass to their children and grandchildren.
For high net worth individuals, the increase provides greater flexibility for gifting and preserving generational wealth.
We encourage our clients to review their current estate plans and reach out to their HBK Tax Advisor to discuss how the increased exemption may provide greater estate planning opportunities.
Take Action Now – Don’t Wait Until 2026
These significant changes to estate tax exemptions create immediate opportunities that shouldn’t be overlooked. With the exemption increasing to $15 million and becoming permanent, now is the optimal time to reassess your estate planning strategy and implement tax-saving techniques that could preserve hundreds of thousands of dollars for your heirs.
Schedule your comprehensive estate planning review to:
Analyze how the increased exemptions impact your current estate plan
Identify new gifting strategies to maximize tax savings
Review and potentially restructure existing trusts
Evaluate business succession planning opportunities
Assess whether your current plan takes full advantage of the permanent exemption increase
Contact your HBK Tax Advisor today at (239) 263-2111 or email to schedule your priority estate planning consultation. Our experienced team will provide personalized strategies tailored to your specific financial situation and family goals.
Don’t let this opportunity pass by – the sooner you act, the more time your new strategies have to work in your favor.
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