One Big Beautiful Bill Act: Navigating the High-Net-Worth Impacts

The Complexity of Estate Planning for the Wealthy

High-net-worth individuals and families often find themselves navigating a labyrinth of estate planning decisions, a process made even more intricate by the recently passed One Big Beautiful Bill Act (OBBBA). For those with estates hovering near or above the $7 million mark, the OBBBA significantly alters the landscape of estate and gift tax planning. This blog aims to simplify these changes and present them in an actionable format.

The New $15 Million Lifetime Exclusion

Starting in 2026, the OBBBA introduces a new $15 million lifetime exclusion for both estate and gift taxes. This amount will be indexed for inflation, allowing for a degree of flexibility as market conditions change. This significant increase provides a more generous cushion that can greatly reduce tax liabilities.

Combined $30 Million Exclusion for Couples

For couples, the situation is even more advantageous with a combined $30 million exclusion, effectively doubling the protection against estate and gift taxes. This provision can drastically decrease tax exposure for many families, providing peace of mind and additional planning opportunities.

Alleviating the Previous $7.2 Million Threshold Risks

Before the OBBBA, there was significant concern regarding the then-projected $7.2 million threshold, which posed risks for estates just at or above this level. The new law alleviates these concerns, dramatically lowering the potential tax burden for many high-net-worth individuals.

Using Exclusions Wisely

It is important to remember that previously used exclusions still count under the new law. For example, if someone had utilized $13.99 million in exclusions, they would gain $1.01 million more starting in 2026. This offers new avenues for strategic planning.

Portability and GST Rules Remain Unchanged

While portability is retained, allowing surviving spouses to utilize a deceased partner's unused estate tax exclusion, the Goods and Services Tax (GST) exemption remains non-transferable. Filing a federal estate tax return remains a necessity to take advantage of portability.

Permanence and Potential Risks

Although the current law does not have a sunset clause, suggesting permanence, it is prudent to be aware that future legislative changes are always possible. This emphasizes the importance of timely estate planning.

Updates for High Earners and Charitable Givers

The OBBBA maintains the 37% top tax rate and introduces a new deduction cap. For charitable givers, a new rule permits cash donations to equal up to 60% of adjusted gross income, providing substantial giving opportunities.

Reduced Urgency, Ongoing Importance

The absence of a 2025 deadline reduces the urgency to act, offering more flexibility in planning. However, the complexity and significance of estate planning for high-net-worth individuals remain, making it essential to stay proactive. The OBBBA offers greater stability and expanded opportunities for estate planning yet retains its complexities, particularly for those who have already made significant gifts. It is an opportune time to update or establish a comprehensive estate plan, taking advantage of the increased exclusion while laws remain favorable. Engaging with an advisor can provide tailored guidance to ensure that your estate planning aligns with the current legislative framework.