The OBBBA and Estate Planning

As you have likely heard by now, on July 4, 2025, President Trump signed the “One Big Beautiful Bill Act” or the “OBBBA” into law. This new tax-and-budget reconciliation package includes the largest overhaul of the Internal Revenue Code since the Tax Cuts and Jobs Act of 2017 (the “TCJA”). 

We’ll explore some provisions of the new law as they relate to estate planning and discussions we are having with clients.

Federal Estate and Lifetime Gift Tax Exemption Amounts for 2025 and Beyond

For 2025, federal estate and gift transfer tax exemptions currently remain at a baseline of $13.99 million per individual and thus nearly $28 million for a married couple. Without the OBBBA, these record high exemption amounts would decrease by roughly half at the end of this year. The new law permanently increases such exemption amounts to a new high of $15 million per individual or $30 million for couples in 2026, with an inflation adjustment each year thereafter. The OBBBA maintains the transfer tax rate for gifts and bequests at 40% of the excess assets transferred above your exemption.

TAKEAWAY: Estates under $15 million are not subject to federal estate tax.  Married couples retain the ability to “port” the combined $30 million exemption.  The biggest news here is that the increased exemption is made permanent, providing some certainty for families going forward.

Annual Gift Tax Exclusions 

The annual gift tax exclusion for 2025 is $19,000 per recipient (up from $18,000 in 2024). This means you can give up to $19,000 to as many individuals as you want during the calendar year without triggering any gift tax implications or having to file a gift tax return.  Married couples can gift $38,000 per beneficiary. 

If you give a single gift exceeding the annual exclusion limit, you'll need to file Form 709, (gift tax return), and the excess amount will count against your lifetime gift tax exemption, discussed above.

TAKEAWAY: the OBBBO did not change the annual gift allowances, and the available amount will continue to be adjusted for inflation each year.

Income Tax Rates 

The new law makes permanent the individual income tax rate brackets originally enacted in 2017. This includes keeping the top marginal tax rate at 37%, avoiding the scheduled increase back to 39.6% that was set to take effect in 2026. The increased standard deduction is also made permanent with a slight boost through 2028, continuing to replace the personal and dependency exemptions that were eliminated under the prior law.

TAKEAWAY: For most individuals, these provisions will not materially change current tax outcomes, but they do offer long-term clarity and simplify planning

529 Plan Enhancements 

The new law expands the flexibility of 529 education savings plans, allowing tax-free withdrawals for a broader range of educational expenses. Previously limited to college costs and up to $10,000 per year for K–12 tuition, the updated rules now permit tax-free withdrawals up to $20,000 per year in 2026 for:

• homeschooling expenses, such as curriculum materials, tutoring, and testing fees

• standardized test preparation, including SAT and ACT fees

• vocational and non-degree credentialing programs, like EMT training or cosmetology licenses

TAKEAWAY: These changes provide greater flexibility for families to use 529 funds across various educational paths, including non-traditional and vocational training.

Universal Savings Accounts (a/k/a “Trump Accounts”) 

The Act introduces “Trump Accounts,” a tax-advantaged savings vehicle designed to help families build long-term capital for children. These accounts are structured to support future expenses related to education, homeownership, or entrepreneurship.

Key Features:

• Available to children under age 8

• Children born between January 1, 2024 and December 31, 2028 will receive a one time $1,000 federal contribution to jumpstart savings

• Parents, relatives, or other taxable entities can contribute up to $5,000 per year in after-tax dollars until the child turns 18

• Funds must be invested in diversified U.S. equity funds, promoting long-term growth

• Assets grow on a tax-deferred basis

• At age 18, up to 50% of the account balance can be withdrawn for qualified expenses such as education costs, first-time home purchases, or starting a small business. These withdrawals are taxed at long-term capital gains rates

• After age 30, the remaining funds can be withdrawn for any purpose, with taxation at ordinary income rates if not used for qualified expenses

TAKEAWAY: While the contribution limits are relatively modest, Trump Accounts offer a structured way to accumulate tax-advantaged savings for children’s future needs. For families already maximizing other tax-advantaged accounts, these accounts provide an additional avenue for long-term planning.

If you want to review your current estate planning with us in light of these new changes, give us a call, we’d be happy to help.