Why you should plan for the estate tax exemption now – the rules have changed, and the window is open

There are numerous estate planning strategies that remain highly effective under the One Big Beautiful Bill Act (OBBBA). These include trust structures, multi-generational planning, charitable giving, maximizing tax-advantaged accounts, and lifetime gifting, including the use of the annual exclusion. With the federal estate and gift tax exemption now permanently elevated and indexed for inflation, individuals and families have a unique opportunity to make meaningful transfers of wealth without incurring federal transfer taxes. Using your estate tax exemption today can help remove future appreciation from your taxable estate and ensure your legacy is preserved across generations.

Why you should act now

The federal estate and gift tax exemption has been significantly expanded under the OBBBA. While the 2025 exemption of $13.99 million per individual remains in effect, the exemption increases to $15 million per individual in 2026, with future indexing for inflation. This exemption applies to transfers made during life or at death, and the 40% federal estate tax rate still applies to amounts above the exemption. For married couples, this means up to $30 million can be transferred free of federal estate and gift tax starting in 2026. State-level estate or inheritance taxes may still apply depending on your jurisdiction.

These changes represent a major shift in estate and gift tax policy, and while the exemption is now permanent and indexed for inflation, it's still wise to revisit your estate plan. The OBBBA introduces new planning dynamics that may affect how and when you transfer wealth, especially if you've previously structured your plan around the now-defunct sunset provisions of the Tax Cuts and Jobs Act of 2017 (TCJA).

Even with a stable exemption, proactive planning remains essential. Strategic use of trusts, such as Delaware Dynasty Trusts, can help remove future appreciation from your taxable estate, provide asset protection, and preserve wealth across generations. The expanded exemption also opens the door for larger lifetime gifts, which can be particularly effective when paired with thoughtful trust design and valuation strategies.

Our insights and guidance

The following points are some planning considerations to think about over the lifetime of your estate. As a reminder, a taxable estate includes all of one's assets at death. This includes cash, stocks/investments, all real estate, business interests, personal property and/or family businesses. Certain life insurance proceeds may be included, depending on ownership.

• Lock in asset values today: For families anticipating significant appreciation or liquidity events, gifting in 2025 can shield future growth from estate tax exposure. Even though the exemption increases in 2026, using part of the current exemption now can help "lock in" today's asset values and remove future appreciation from the taxable estate.
• Consider how much you can afford to give away during your lifetime without sacrificing your lifestyle: Once an irrevocable gift is made, the asset no longer belongs to the donor. Careful modeling can help balance generosity with long-term financial security.
• Review and optimize trust structures: Irrevocable trusts remain central to estate planning, and include structures like:

• Spousal Lifetime Access Trusts (SLATs)
• Grantor Retained Annuity Trusts (GRATs)
• Irrevocable Life Insurance Trusts (ILITs)
• Dynasty Trusts

These structures can help preserve wealth across generations, provide creditor protection, and offer control over asset disposition. Gifts can be made directly to heirs or to trusts for their benefit. Consult with an advisor to determine which structure best fits your goals.

• Select the right assets for gifting: Work with your advisor to identify assets with high appreciation potential or favorable cost basis characteristics. Removing high-growth assets from your estate can reduce future estate tax exposure, while retaining low-basis assets may allow for a step-up in basis at death.
• Explore asset swaps and intra-family loans: For families who have already used a significant portion of their exemption, alternative strategies like asset swaps or intra-family loans can help rebalance estate plans and shift value efficiently. These techniques may allow for continued planning flexibility without triggering immediate gift tax consequences, especially when paired with trust structures or business interests.
• Plan for liquidity and execution: Complex strategies, such as transferring business interests or funding large trusts, require time. Begin early to ensure valuations, legal documents, and funding logistics are in place before the exemption increases in 2026.
• Coordinate with state-level planning: Many states impose estate or inheritance taxes with thresholds far below federal levels. Strategic gifting in 2025 can help mitigate those exposures and reduce overall tax liability.
• Timing is everything: While the exemption increases in 2026, organizing your financial affairs and meeting with your advisory team early ensures you have time to create, execute, and fund your plan, especially for multi-step strategies.

In closing

The OBBBA has created new opportunities in estate and gift tax planning, with a significantly expanded exemption and greater clarity for long-term strategies. The amplitude of change means that estate plans should be revisited and optimized. The next year and a half will be an active period for trust and estate professionals as families adapt to the new tax policies. Engaging your advisory team early will help ensure your plan reflects current law, aligns with your goals, and is ready to take full advantage of the expanded exemption.

Your Citizens Private Wealth Advisor* is available to help you navigate these changes and develop a customized estate and gifting strategy. The earlier you begin the conversation, the more flexibility and foresight you’ll have to respond to future opportunities and legislative developments.