One, Big Beautiful Act estate tax changes

Tax professionals who advise high-net-worth individuals have long faced the challenge of navigating uncertainty around estate and gift tax planning. The Tax Cuts and Jobs Act (TCJA) of 2017 temporarily doubled the federal exemption for estate, gift, and generation-skipping transfer (GST) tax purposes, but those provisions were scheduled to sunset at the end of 2025. This created a surge of planning activity under the fear of a rollback to pre-TCJA thresholds.

0B3 permanently increases the exemption

That uncertainty is now resolved. On July 4, 2025, the president signed the One Big Beautiful Bill Act (OB3) into law, making the exemption increase not only permanent, but even more generous. Effective January 1, 2026, the federal exemption for estate, gift, and GSTtax increased to $15 million per individual. This amount will also be indexed for inflation beginning in 2027.

For estate planners and tax professionals, this new law provides much-needed stability. The sunset of the TCJA was estimated to reduce the exemption from $13,990,000 in 2025 down to approximately $7,140,000 in 2026. Instead, the OB3 increases the exemption and removes the expiration risk, allowing for longer-term planning strategies without the threat of abrupt federal changes.

Technical details and IRS guidance

From a technical standpoint, Section 70106 of the OB3 mirrors Section 110006 of the House bill, and increases the lifetime exemption for estates of decedents dying, gifts made, and GSTs occurring after 2025. This change offers an opportunity to reevaluate lifetime gifting strategies for wealthy clients who may now choose to retain more assets rather than gifting under pressure.

Clients who took advantage of the increased exemption under the TCJA by making large lifetime gifts through 2025 will not be penalized. Per existing IRS guidance (see Reg. Section 20.2010-1(c)), any use of exemption that exceeds the post-2025 amount will not be “clawed back” into the estate if the exemption were to be reduced. Still, with the exemption permanently raised, the incentive to make gifts solely due to expiring thresholds is eliminated.

Legislative uncertainty still matters

Yet, despite this new permanency, experienced tax advisors will recognize that legislative changes are always subject to future reversal. As a result, planning conversations must still balance today’s favorable environment with the long-term possibility of policy shifts. A future Congress could revisit exemption levels, tax rates, or valuation rules, particularly if political dynamics shift.

Therefore, even with a more generous and permanent exemption, early lifetime gifting remains a sound strategy for many clients. Gifting today removes not just the current value of assets from a client’s estate, but also the future income and appreciation of those assets. For rapidly growing business interests or appreciating real estate portfolios, the compounding benefit of early transfers can be significant.

Practical planning applications

From a practical perspective, tax professionals and estate planners should begin identifying clients who benefit from the increased exemption. Individuals who have exhausted their prior exemptions may now wish to revisit their planning and take advantage of the new $15 million threshold. Clients who delayed planning in 2025 due to indecision can now proceed with more confidence.

Moreover, the increase in the GST exemption allows for broader use of dynasty trusts and other multigenerational structures. Advisors working with families seeking to preserve wealth across generations should assess whether existing trusts are fully leveraging the new limits.

The OB3 also simplifies state-level planning in jurisdictions that conform to the federal exemption. Many state estate tax systems reference the federal exemption amount. With a larger federal benchmark, more estates may now fall below the state tax filing thresholds, reducing administrative complexity.

Importantly, this change may alter charitable giving strategies. Some clients may opt to adjust the balance between charitable and family gifting, now that more wealth can be passed tax-free to heirs. This requires careful recalibration of philanthropic plans and should involve collaboration between tax, estate, and investment advisors.

In conclusion, the estate and gift tax provisions of the OB3 significantly reshape the planning landscape. The new $15 million exemption is a game changer for wealthy clients and the professionals who advise them. While no law is truly permanent, the enhanced certainty provided by this legislation opens the door to more strategic, efficient, and impactful planning. Advisors should proactively revisit client plans, refresh financial models, and ensure that gifting, trust structures, and business succession strategies align with the expanded exemption framework.