Estate planning 2025: Readiness beyond exemptions

By Erik Berge | Senior Wealth Strategist, Citizens Private Wealth

Many of us see estate planning as a one-time task to complete, but determining how you want to pass on your assets to beneficiaries is an ongoing process. Life events, such as changes in family structure, financial circumstances, or health, can prompt updates to your plan. So can shifts in tax law, which may open new opportunities or require adjustments to preserve your intentions. One such shift happened this year with the passage of the OBBBA.

Under the OBBBA provisions, households no longer need to anticipate the sunset of the Tax Cuts and Jobs Act (TCJA) in their estate plans. OBBBA goes beyond preserving historically high exemption thresholds. It raises them, setting a new long-term baseline for estate and gift tax planning.

Regardless of tax law changes, you should review and update your estate plan regularly to reflect your current situation. By continually adapting your estate planning strategy to your circumstances and the tax law environment, you can pass down assets according to your wishes while maximizing what you leave behind to the people and causes you care about.

A new baseline: estate and tax planning after the OBBBA

The long-anticipated sunset of the Tax Cuts and Jobs Act (TCJA) in 2026 is no longer on the horizon. With the passage of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, Congress made permanent many of the TCJA's core provisions and introduced new thresholds that reshape planning conversations, starting now.

For estate planning, the most significant change is the increase in the federal estate and gift tax exemption to $15 million per individual (or $30 million per couple), effective January 1, 2026. This new exemption is not a reversion to pre-TCJA levels, but a fresh baseline, indexed for inflation going forward. The top estate and gift tax rate remains at 40%.

While the exemption increase doesn't take effect until next year, the planning window is already open. Clients who previously used their full exemption under TCJA may now consider "topping off" gifts to align with the new limits. Others may revisit valuation discounts, GRATs, or other strategies to remove future appreciation from the estate ahead of the 2026 changes.

Why estate planning is an evolving process

The passage of the OBBBA underscores why estate planning is a dynamic process that requires periodic reassessments. To ensure your plan evolves with the environment and your own situation, regularly review and update your estate plan to account for changes in personal circumstances, tax laws and shifting business or family dynamics.

You should also integrate estate planning into a broader financial strategy that includes wealth preservation, risk management and tax efficiency.

How can you be prepared for the changes under OBBBA and an evolving tax regime?

First, determine where you are in your estate planning process and then make adjustments accordingly.

Core estate planning documents for early-stage planning

The following documents are essential components of any estate plan.

Wills and revocable trusts

In a will, you state your wishes about distributing your assets to beneficiaries, including leaving donations to charities. If you have substantial assets or want more control over what happens over your assets, consider passing down assets through a revocable trust. A revocable trust lets you transfer an inheritance to your heirs more quickly, privately, and cost-effectively than through a will. A will and revocable trust helps ensure your wishes are followed, while facilitating smoother estate administration.

A revocable trust is not subject to probate, the legal process of reviewing a person's will and distributing their assets to heirs. Probate is also a public process that makes the details of your estate visible to the general public.

Health care proxies and powers of attorney

Estate planning documents can also protect you and your family if you face a health issue that leaves you incapacitated and unable to make decisions about your health or finances. With a health care proxy, you name an individual who will make health care decisions for you. A durable power of attorney is a person or institution appointed to take care of your finances if you cannot do it yourself.

Mid-stage estate planning: Gifting strategies and irrevocable trusts

Once your core estate planning documents are in place, consider how you can give money to loved ones in a tax-efficient way.

For calendar year 2025, individuals can gift up to $19,000 to any and as many individuals as they choose. Married couples can therefore gift up to $38,000 per gift recipient. This is a simple, effective way to transfer some of your wealth to beneficiaries without impacting your lifetime estate and gift tax exclusion amounts or having to file a gift tax return. Incorporating annual exclusion gifts into your planning strategy will help reduce the size of your taxable estate over time and thus lower any potential estate tax liability.

Funding irrevocable trusts

Trusts hold property on behalf of one or more people and can be a key part of estate planning. If the value of your estate may exceed the estate tax exemption, it may be worth contributing assets today into an irrevocable trust that will benefit your children and grandchildren. Assets placed in an irrevocable trust are removed from your taxable estate. Gifting assets now allows all future growth to occur outside of your taxable estate and free of estate tax. Note, for if contributions to an irrevocable trust exceed the annual exclusion amount, you will need to file a gift tax return which will track the use of your lifetime exemption amounts.

Advanced estate planning: Estate freeze techniques

Grantor Retained Annuity Trusts (GRATs)

Once you have exhausted your lifetime estate and gift tax exemption, there are other options to consider in order to further mitigate estate taxes further shift growth outside of your taxable estate. GRATs are irrevocable trusts that allow you to transfer asset appreciation, often publicly traded securities, with little or no gift tax exposure. Assets contributed to a GRAT and in return, the grantor receives annual annuity payments back from the trust for a specified period. Any appreciation that exceeds the minimum interest rate on these payments at the end of the term will pass to beneficiaries outside of the taxable estate, effectively freezing the value of assets that were contributed.

Intra-family loans

Intra-family loans can help you transfer wealth efficiently, especially when interest rates are low. Family loans can support family members without reducing your lifetime estate tax exemption.

However, note that the IRS requires that any loan between family members come with a signed written agreement, a fixed repayment schedule and a minimum interest rate set by the IRS. The interest earned on the loan is taxable income and depending on how the loan is used, the interest paid may be tax deductible.

Advanced estate planning: Charitable giving

Incorporating a Donor-advised fund (DAF) or private foundation or into your estate plan will reduce your taxable estate and mitigate potential tax liabilities. By contributing cash, stocks, business interests and other assets to these, you immediately reduce your taxable estate and receive an income tax deduction in the year the gift was made. Note, structuring and implementing a private foundation will require further discussion with your estate attorney as there are specific rules to be aware of regarding the implementation, tax treatment and administration.

Irrevocable "split interest" trusts provide ways to benefit your heirs and the charities you support while further reducing your taxable estate. These trusts can also be effective tools for income tax planning around concentrated stock positions and low basis assets, allowing you to manage capital gains and receiving income tax deductions.

A Charitable Remainder Trust (CRT) allows you to transfer concentrated, low-basis stock to the trust, avoiding immediate capital gains taxes when the stock is sold. The trust then provides you or another beneficiary with annual income payments for a specified term or for life. After the term ends, the remaining assets in the trust are donated to a designated charity, which can be your DAF or private foundation.

Conversely, a Charitable Lead Trust (CLT) provides annual distributions to a charity for specified term. After the term ends, the remaining assets in the trust are transferred to non-charitable beneficiaries. Depending on how this trust is structured, the grantor or the trust itself will receive the income tax deduction and be responsible for income taxes generated during the trust term.

Consult with your wealth manager to update your estate plan

Your wealth manager can help you determine your goals, legacy, and tax strategy, as well as which trust, or other estate planning tools are most appropriate to help you accomplish your estate planning and other related financial goals. By establishing and building a relationship with your wealth manager, you will benefit from a collaborative and continuous relationship and be better positioned to address changing circumstances, laws, and legacy goals. Schedule a consultation with a Citizens Wealth Manager to review or update your estate planning and wealth transfer goals.