One Big Beautiful Bill Act Permanently Increases the Lifetime Estate, Gift and GST Tax Exclusion
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA). The OBBBA extended and made permanent many key provisions of the 2017 Tax Cuts and Jobs Act (the TCJA), including the Lifetime Estate, Gift, and GST Tax Exclusion.
The Lifetime Estate, Gift, and GST Tax Exclusion:
When someone dies, the federal government imposes a 40% estate tax on property owned by a decedent as of their date of death, if, or to the extent that, the decedent’s estate exceeds their remaining Lifetime Estate, Gift and GST Tax Exclusion amount (the Exclusion Amount). A taxpayer’s Exclusion Amount is reduced by the amount used to offset taxable gifts made by the taxpayer during their lifetime.
In 2017, the TCJA doubled the Exclusion Amount from US$5 million per individual to US$10 million per individual (US$20 million per married couple). Under the TCJA, the Exclusion Amount was indexed with inflation, and increased annually, reaching US$13.99 million per individual (US$27.98 million per married couple) in 2025. However, the TCJA’s increase of the Exclusion Amount was set to sunset at the end of 2025. With the inflation adjustment, experts had anticipated that, after the expiration of the TCJA’s increases, the Exclusion Amount would be reduced to approximately US$7.2 million per individual on January 1, 2026.
The OBBBA’s Permanent Increase of the Exclusion Amount:
Effective for estates of decedents dying and gifts made after December 31, 2025, the OBBBA increases the Exclusion Amount to US$15 million per individual (US$30 million per married couple), subject to an annual inflation adjustment. Unlike the TCJA, the increased Exclusion Amount under the OBBBA is permanent and is not set to expire. Of course, the Exclusion Amount can be modified at any time by Congress and could be reduced by subsequent tax legislation.
The OBBBA Did Not Modify the Annual Gift Tax Exclusion:
The OBBBA did not modify the annual Gift Tax Exclusion, which is currently US$19,000 per individual per donee (or US$38,000 per married couple per donee), and which adjusts annually with inflation. The annual Gift Tax Exclusion is expected to increase in 2026, as it adjusts annually with inflation.
The OBBBA Did Not Modify Rules for Grantor Trusts, Installment Sales, or GRATs:
The OBBBA did not change existing rules for grantor trusts, installment sales, or GRATs. These lifetime gifting techniques remain available for taxpayers wishing to utilize their lifetime gift tax exemption to decrease their overall gift and estate tax exposure.
Estate Planning Considerations for Taxpayers:
Prior to the passage of the OBBBA, taxpayers with estates greater than the Exclusion Amount were rushing to “use” their remaining Exclusion Amount before they “lost” it at the end of 2025. While the OBBBA does buy taxpayers additional time to use their Exclusion Amount, it should not deter taxpayers who were considering making lifetime gifts from doing so. There are still significant advantages to utilizing your remaining Exclusion Amount now, including locking in low-value assets, utilizing discounted gifting during economic uncertainty, and maximizing the benefit of future gain of high-growth assets. Please consult with your estate planning and tax advisors regarding the best strategies for maximizing the benefit of your remaining Exclusion Amount.
For more information on the OBBBA, please click here.
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