Estate exemption triples to $15 million per person

Historic estate tax relief transforms wealth transfer planning

The One Big Beautiful Bill Act delivers the most significant estate tax reform in decades by tripling the federal estate and gift tax exemption from $5 million to $15 million per person. This permanent change eliminates estate tax concerns for the vast majority of American families while creating unprecedented wealth transfer opportunities for high-net-worth individuals.

Under Section 70106 of the legislation, the enhanced exemption applies to all estates and gifts made after December 31, 2025. For married couples using portability provisions, the combined exemption reaches $30 million, effectively removing federal estate tax as a concern for all but the wealthiest American families.

The timing of this legislation is crucial for families facing a potential cliff. Without congressional action, estate planning strategies would have become essential as exemptions were scheduled to drop to approximately $6 million in 2026 under the TCJA sunset provisions. This tripled exemption fundamentally changes estate planning calculations for millions of Americans, allowing families to focus on wealth building and legacy planning rather than complex estate tax avoidance strategies.

Understanding the new $15 million estate exemption structure

The One Big Beautiful Bill Act establishes a new framework for estate and gift taxation that provides both immediate relief and long-term planning certainty. The enhanced exemption represents a permanent change rather than a temporary provision, eliminating the uncertainty that plagued previous estate tax legislation.

Key features of the enhanced estate exemption include the following elements:

• The base exemption amount increases from $5 million to $15 million per individual
• Married couples can shield up to $30 million through portability elections
• Inflation adjustments will be calculated using 2025 as the base year
• The sunset clause from TCJA is permanently repealed
• The 40% top estate tax rate remains unchanged for amounts exceeding the exemption

The inflation adjustment methodology creates important planning implications. By resetting the base year to 2025 instead of 2010, future annual increases will be calculated on a smaller base, resulting in slower growth of the exemption over time than under the original methodology.

For Individuals currently engaged in estate planning, the enhanced exemption provides flexibility to reconsider existing strategies and simplify complex trust structures that were designed primarily to minimize estate tax exposure.

Calculating estate tax savings under the new legislation

The tripled exemption delivers substantial tax savings for estates that would otherwise be subject to the federal estate tax. Understanding the magnitude of these savings helps families appreciate the full impact of this legislative change and make informed planning decisions.

Example calculation for a single individual:

1. Estate value at death: $12 million
2. Previous exemption (2025): approximately $6.8 million
3. Taxable estate under old law: $5.2 million
4. Estate tax at 40%: $2,080,000

Under the new law with the $15 million exemption, the same $12 million estate would owe zero federal estate tax, eliminating the $2,080,000 tax liability.

Example calculation for a married couple:

1. Combined estate value: $28 million
2. Previous combined exemption: approximately $13.6 million
3. Taxable estate under old law: $14.4 million
4. Estate tax at 40%: $5,760,000

The One Big Beautiful Bill Act eliminates this entire $5,760,000 tax liability for the couple, as their combined $28 million estate falls below the new $30 million combined exemption threshold. These calculations demonstrate why the tripled exemption represents transformative relief for families who were facing substantial estate tax exposure under the previous law.

Gift tax coordination multiplies planning opportunities

The One Big Beautiful Bill Act maintains the unified estate and gift tax system, meaning the $15 million exemption applies to lifetime gifts as well as testamentary transfers. This coordination creates powerful planning opportunities for families who want to transfer wealth during their lifetimes.

Strategic benefits of the enhanced gift tax exemption include shifting asset appreciation outside the taxable estate, income tax savings from gifting appreciated assets, educational and medical expense exclusions that operate independently, and annual exclusion gifts that preserve the lifetime exemption. Families can now transfer substantially larger amounts during their lifetimes without triggering gift tax liability.

The Traditional 401k and other retirement accounts require careful consideration in gift planning, as these assets cannot be transferred during a lifetime without triggering income tax consequences. The enhanced exemption provides greater flexibility to allocate retirement assets within estate plans while using the gift tax exemption for other asset categories.

Family business succession benefits substantially

The tripled estate exemption dramatically simplifies succession planning for family-owned businesses. Many family enterprises that previously required complex planning strategies to avoid estate tax fragmentation can now transition between generations without federal estate tax concerns.

Business succession advantages under the enhanced exemption involve the following considerations:

• Businesses valued under $15 million can transfer completely free of estate tax
• Married business owners can pass enterprises worth up to $30 million tax-free
• Life insurance needs for estate tax liquidity decrease significantly
• Buy-sell agreement funding requirements may be reduced
• Family limited partnership complexity can be reconsidered

For S Corporations and other pass-through entities, the enhanced exemption allows business owners to focus on operational succession rather than tax-driven ownership structures. Families can maintain simpler ownership arrangements while achieving the same wealth transfer goals that previously required complex planning.

Real estate holdings receive planning flexibility

Real estate investors and families with substantial property holdings benefit significantly from the tripled estate exemption. Properties that would have required valuation discounting strategies or complex ownership structures can now be held more simply while achieving estate tax-free transfers.

The enhanced exemption changes real estate planning dynamics through the following mechanisms:

1. Primary residences and vacation homes are included in the exemption without special planning
2. Investment properties can be held directly rather than through discount entities
3. Rental portfolios under $15 million transfer completely tax-free
4. Land holdings appreciate outside estate tax concerns for most families

The Augusta rule income strategies can be implemented without estate tax complications.

For families considering the Sell your home exclusion, the enhanced estate exemption provides additional flexibility. Properties can be retained for stepped-up basis benefits at death without concern about estate tax consequences for estates below the new threshold.

Retirement account planning considerations

The enhanced estate exemption creates new considerations for retirement account planning and beneficiary designations. With reduced estate tax concerns, families can optimize their retirement asset strategies based on income tax efficiency rather than estate tax minimization.

Retirement planning coordination includes Roth 401k conversion analysis, which may become more attractive as estate tax concerns diminish. Converting traditional retirement accounts to Roth accounts reduces future required minimum distributions and provides tax-free growth for beneficiaries.

Strategic retirement account considerations include the following elements:

• Beneficiary designations can focus on income tax optimization
• Stretch IRA alternatives may be evaluated differently
• Qualified charitable distributions provide enhanced planning flexibility
• Health savings account balances transfer tax-free to spouse beneficiaries
• Required minimum distribution strategies can prioritize wealth transfer goals

Trust strategy reconsideration opportunities

Many existing irrevocable trusts were established primarily to remove assets from taxable estates. The tripled exemption creates opportunities to reconsider whether these complex arrangements remain necessary or whether simpler alternatives might achieve the same goals.

Trust planning reconsideration involves the following analysis:

1. Irrevocable life insurance trusts may no longer be needed for estate tax purposes
2. Grantor retained annuity trusts offer reduced benefits for smaller estates
3. Qualified personal residence trusts may be simplified or unwound
4. Dynasty trust funding priorities may shift
5. Charitable remainder trusts can focus on income and charitable goals rather than estate tax benefits

For families with existing complex trust structures, the enhanced exemption does not automatically eliminate these arrangements. However, it provides opportunities to evaluate whether the ongoing administrative costs and complexity remain justified given the reduced estate tax exposure.

State estate tax considerations remain important

While the One Big Beautiful Bill Act triples the federal estate exemption, state estate and inheritance taxes remain unchanged by federal legislation. Families in states with separate estate taxes must continue planning for potential state-level liability.

States with estate taxes that may still apply include Connecticut with exemptions around $13 million, Illinois with exemptions around $4 million, Massachusetts with exemptions at $2 million, New York with exemptions around $7 million, Oregon with exemptions at $1 million, Washington with exemptions around $2.2 million, and the District of Columbia with exemptions around $4.7 million.

Families in these states may still require estate planning strategies to minimize state estate tax, even when the federal estate tax is no longer a concern. Understanding your 2025 New York State Tax Deadlines and other state-specific requirements remains essential for comprehensive estate planning, regardless of federal exemption levels.

Documentation and compliance requirements

The enhanced estate exemption does not eliminate estate tax filing requirements in all cases. Understanding when Form 706 estate tax returns remain necessary ensures compliance while taking advantage of the tripled exemption.

Estate tax return requirements include the following situations:

• Estates exceeding the basic exclusion amount must file Form 706
• Portability elections require a timely Form 706 filing even for smaller estates
• Generation-skipping transfer tax allocations may require a return filing
• Qualified disclaimers should be documented properly
• Gift tax returns remain required for gifts exceeding annual exclusions

For Partnership interests and other complex assets, proper valuation documentation supports the position that estate values fall within the enhanced exemption limits. Maintaining detailed records of asset values, ownership structures, and planning decisions protects in the event of a future IRS inquiry.

Investment strategy coordination opportunities

The tripled estate exemption creates opportunities to coordinate estate planning with investment strategies. With reduced estate tax concerns, families can optimize investment decisions based on income tax efficiency and wealth-building goals.

Investment coordination strategies include retaining appreciated assets for stepped-up basis at death, Tax loss harvesting to optimize current-year tax positions, asset-location strategies that prioritize income tax efficiency, and Depreciation and amortization strategies that focus on income tax benefits.

The combination of an enhanced estate exemption and stepped-up basis at death creates powerful wealth-transfer opportunities. Highly appreciated assets can be retained until death, eliminating both capital gains tax on appreciation and estate tax on transfer for estates within the exemption limits.

Implementation timeline and transition planning

The One Big Beautiful Bill Act enhanced estate exemption applies to estates of decedents dying after December 31, 2025, and to gifts made after that date. Understanding this timeline helps families plan their wealth transfer strategies appropriately.

Implementation planning considerations include the following elements:

1. Existing estate plans should be reviewed for alignment with new exemption levels
2. Trust documents may reference exemption formulas that produce different results
3. Life insurance coverage amounts may be reconsidered
4. Gift timing strategies should account for the effective date
5. Professional advisor consultations should be scheduled for comprehensive reviews

For families currently engaged in substantial gifting programs, the transition to the enhanced exemption may affect optimal timing decisions. Gifts made in 2025 under current exemption levels versus gifts made in 2026 under enhanced levels may produce different planning outcomes, depending on individual circumstances.

Secure your family's financial legacy today

The One Big Beautiful Bill Act's tripled estate exemption represents a generational opportunity to transfer wealth to your loved ones free of federal estate tax. With exemptions rising to $15 million per individual and $30 million for married couples, most American families can now focus on building wealth and legacy rather than complex tax avoidance strategies.

Instead's comprehensive tax platform helps you coordinate your estate planning with ongoing tax optimization strategies, ensuring you maximize every available benefit under the new legislation. Our intelligent system identifies opportunities to reduce current income taxes while building long-term wealth for future generations.

Get started with a pricing plan that fits your needs and begin optimizing your complete tax picture under the One Big Beautiful Bill Act's enhanced provisions.

Frequently asked questions

Q: How much can married couples transfer estate tax-free under the new law?

A: Married couples can transfer up to $30 million combined estate tax-free under the One Big Beautiful Bill Act. This combines the $15 million per-person exemption through portability elections, which must be made on a timely-filed estate tax return for the first spouse to die.

Q: When does the enhanced $15 million estate exemption take effect?

A: The enhanced estate exemption applies to estates of decedents dying after December 31, 2025, and to gifts made after that date. The exemption will be adjusted for inflation using 2025 as the base year, potentially increasing the dollar amount in future years.

Q: Does the tripled exemption affect state estate taxes?

A: No, the federal exemption increase does not automatically affect state estate or inheritance taxes. States with separate estate taxes, like Massachusetts, Oregon, and New York, maintain their own exemption levels, which are generally much lower than the new federal threshold.

Q: Should I update my estate plan because of this legislation?

A: Yes, most estate plans should be reviewed following this legislation. Trust formulas that reference federal exemption amounts may produce unexpected results, and planning strategies designed primarily for estate tax avoidance may no longer be necessary or optimal.

Q: Can I still use trusts for estate planning under the enhanced exemption?

A: Trusts continue to serve valuable purposes beyond estate tax minimization, including asset protection, privacy, management during incapacity, and control over distributions to beneficiaries. However, the need for complex trust arrangements may be reduced for estates below the enhanced exemption threshold.

Q: What happens to gifts I made before the enhanced exemption takes effect?

A: Gifts made under previous exemption levels remain valid and continue to reduce your available lifetime exemption. However, the enhanced exemption provides additional capacity for future gifts without triggering gift tax liability, effectively providing more room for wealth transfer.