Finally … some clarity!
Federal Estate Tax planning has been more turbulent the past twenty years than sailing a ship through a hurricane. Ok, that’s an exaggeration. Nevertheless, we have clarity now. As a result of the OBBB Act (One Big Beautiful Bill) signed into law on July 4, 2025, the estate and lifetime gift tax exemption increased to $15,000,000 for single filers and $30,000,000 for joint filers, starting in 2026, and is adjusted annually for inflation. Prior to this law, the exemption increased annually but was set to decrease to approximately $7,500,000 in 2026. The clock was ticking as the prior favorable law was to “sunset” at of the end of 2025. As a result, taxpayers considered drastic measures including significant lifetime gifting in amounts greater than $7,500,000 to capture this “closing window” of opportunity to gift the difference between the current exemption and the anticipated exemption. This recent change in law provides some relief as it is now a “permanent” law. Note that there is portability of the exemption between spouses for federal estate and gift tax purposes. The need for the surviving spouse to file an estate tax return at the death of the first spouse even if below the threshold to claim the “DSUE” (deceased spouse unused exemption; to preserve it for the surviving spouse’s estate at their subsequent death) remains unchanged by the new law.
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