The One Big Beautiful Bill Act (OBBBA) was signed into law by President Donald Trump on July 4, 2025, making several of Trump’s 2017 tax-related provisions permanent, while adding and expanding on those provisions as part of a sweeping tax cuts package that will prove to impact millions of taxpayers and businesses nationwide. Here is an analysis of how the bill affects the estate planning of high-net-worth clients and planning strategies to consider.
The headline in the bill for estate planners is that the increased lifetime estate, gift and generation skipping transfer (GST) tax exemption amounts are scheduled to increase to $15 million for single filers and $30 million for joint filers in 2026. Accordingly, planners and their clients should consider the following when exploring the use of these increased exemptions:
- Review the structure of trusts in place and fund new trusts, such as:
- SLATs (Spousal Lifetime Access Trusts): Maximize the use of increased exemptions for at least one spouse while maintaining indirect access to transferred assets through the beneficiary spouse.
- IDGTs (Intentionally Defective Grantor Trusts): Offers a variety of planning opportunities through transactions between the grantor and the trust.
- Irrevocable Non-Grantor Trusts: Trusts that generally pay their own tax and allow for the shifting of income, as well as maximizing deductions available at the trust level. Additional considerations for income tax planning opportunities are discussed later in this article.
- Dynasty Trusts: Multi-generational planning available through the utilization of the increased GST tax exemption.
- Bypass Trusts: Maximize the use of increased exemptions at the federal level and as a tool to manage state exemptions where applicable.
- Efficient use of portability between spouses.
- The remaining unused exemption from the first spouse to die is transferred to the surviving spouse. See more in the following article, “Achieving Optimal Estate Planning Through Portability.”
- Transfer minority interests in illiquid assets, such as closely held businesses or real estate.
- Using valuation discounts where applicable for reduced gift tax cost.
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For clients who may have already used nearly all their exemption by way of lifetime transfers, consider a Grantor Retained Annuity Trust (GRAT) or an installment sale of assets between a grantor and an IDGT to transfer future appreciation out of the grantor’s estate at minimal or no gift tax cost. Additionally, ensuring life insurance is in place and held by an Irrevocable Life Insurance Trust (ILIT) will be crucial for these clients.
The OBBBA prompts us to take a fresh look at income tax planning considerations surrounding non-grantor trusts as well. By way of the bill increasing the SALT deduction cap from $10,000 to $40,000 and making permanent the QBI deduction in 2025, which are both applied individually to trusts, opportunities for the shifting of income to trusts to maximize these deductions have become more relevant. For instance, rather than fund one trust for the benefit of three beneficiaries, funding a separate trust for each beneficiary may provide more deductions for each trust, resulting in overall tax savings. Alternatively, trustees of non-grantor trusts could consider retaining income in the trust if the state income tax deduction shields the income from taxation at the trust level.
High-net-worth clients with philanthropic goals should also revisit their charitable giving strategies, as the OBBBA has brought changes to charitable contribution deductions starting in 2026. Itemizers will see their charitable contribution deduction reduced by a floor of 0.5% of their Adjusted Gross Income (AGI), and an overall limit on itemized deductions for clients in the 37% bracket. This effectively limits the tax benefit received from itemized deductions to 35 cents on the dollar for amounts beyond where the 37% bracket begins for the taxpayer.
Continuing to implement estate planning strategy, even for clients likely to fall below the estate tax exemption at death, remains crucial even in this environment of increased exemptions. Future legislative proposals surrounding more severe estate tax, wealth taxes and tighter scrutiny surrounding the use of trusts in estate planning are not out of the realm of possibility. Clients with significant wealth should move forward with a sense of urgency to ensure they maximize the opportunities presented by the OBBBA while they are available.
Author: Anthony Pagano, CPA | [email protected]
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For more information on this topic, please contact a member of Withum’s Estates and Trusts Services Team.
