On July 4, 2025, President Trump signed the “One Big Beautiful Bill” into law (2025 Act), which made permanent a number of important tax provisions that were set to expire on January 1, 2026.
From an estate planning standpoint, the 2025 Act not only avoided a significant reduction in the exemption from gift and estate taxes (Exemption), but actually increased the Exemption. Below is a brief refresher of where things stood as we approached the midpoint of the 2025 calendar year:
- In 2017, the Tax Cuts and Jobs Act (TCJA) became law. As part of the TCJA, the Exemption was doubled from $5,000,000 to $10,000,000 (indexed for inflation, with the inflation adjusted Exemption being $11,180,000 in 2018).
- The TCJA contained a sunset provision whereby on January 1, 2026, the Exemption would revert back to pre-TCJA levels (as adjusted for inflation). This would have resulted in a decrease in the Exemption to approximately $6,000,000 – $7,000,000.
- As a result of the sunset, estate planning attorneys were working with clients to utilize the increased Exemption prior to the sunset – a “use it or lose it” approach.
The 2025 Act makes “permanent” a $15,000,000 Exemption (adjusted for inflation) beginning in 2026. This means that each individual can pass up to $15,000,000 to their intended beneficiaries free from gift and estate tax, and married couples can essentially pass up to $30,000,000.
While the passage of the 2025 Act mitigates the urgency to utilize remaining Exemption amounts before the end of 2025, there is a reason that the word “permanent” as used in the previous paragraph is in quotations. In this context, permanent could mean until the next shift in political majority, which could come as early as 2028.
So, while the “use it or lose it” approach may have lost its luster in the short-term, it is still wise to evaluate taxable estates to assess whether or not it makes sense to employ strategies to reduce those estates and mitigate gift and estate tax exposure going forward.
