On May 22, 2025, the U.S. House of Representatives passed President Trump’s One, Big, Beautiful Bill. The bill now awaits approval by the Senate. One of the various goals of the bill is to extend the Tax Cuts and Jobs Act’s (TCJA) estate tax provisions beyond 2025. Consequently, if the bill is approved and signed into law, it will impact the future of estate planning. The TCJA was enacted in 2017 by President Trump. Among other things, the TCJA increased the estate tax exemption from $5.49 million per individual in 2017 to $11.18 million in 2018. This amount, adjusted for inflation, in 2025 is $13.99 million per person.
President Trump’s One, Big, Beautiful Bill seeks to increase the estate tax exemption even more. If the bill is passed and signed into law, the new exemption will rise to $15 million per individual for 2026, an all-time high. Additionally, the federal estate tax rate will remain the same at 40% and the generation-skipping tax (GST) tax exemption will align with the increased estate tax exemption. If the bill is not passed, the exemption will revert to its pre-TCJA amount on January 1, 2026, estimated to be approximately $7 million, adjusted for inflation.
Now is still a good time to consider making gifts to lock in the current exemption rates. Additionally, even if the exemption increases, gifting now can remove future appreciation from the taxable estate. Higher exemption rates also provide gifting opportunities for clients with harder to value assets as there will be more room to avoid tax even if the IRS attempts to adjust the value of a gift upwards on audit. Clients who live in states with a state estate tax also need to consider how their state system interacts with the federal estate tax regime.
