For most of 2024 and the first half of 2025, high-net-worth estate planning was dominated by a single question: “Do I need to use my exemption before it drops?” The TCJA had elevated the federal estate and gift tax exemption to roughly $13.99M per person in 2025, but that elevated amount was scheduled to sunset on January 1, 2026 — reverting to an inflation-adjusted TCJA-pre-2018 base of about $7 million per person. Attorneys across the country advised wealthy clients to pull forward gifts and lock in the higher exemption before it disappeared.
The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, eliminated that sunset. Starting in 2026, the per-person exemption is permanently set at $15,000,000 (indexed for inflation in later years), and the old “use it or lose it” urgency is gone.
What Actually Changed
| Year | Per-person exemption | Sunset scheduled? |
|---|---|---|
| 2024 | $13,610,000 | Yes — TCJA to ~$7M on 1/1/2026 |
| 2025 | $13,990,000 | Yes — TCJA to ~$7M on 1/1/2026 |
| 2026 | $15,000,000 | No — OBBBA made permanent, indexed thereafter |
| 2027+ | $15M + CPI adjustment | No |
The annual gift tax exclusion remains $19,000 per recipient for both 2025 and 2026. Married couples can still use portability to double the estate exemption to $30,000,000 on the second death, and the 40% top estate tax rate is unchanged.
Who This Changes the Calculus For
For estates under ~$15M single / ~$30M married: Nothing material changes. You were unlikely to owe federal estate tax before, and you are still unlikely to owe it now. State estate taxes (in 12 states plus DC) still apply with much lower thresholds — Oregon at $1M, Massachusetts at $2M, Washington at $2.2M — so state-level planning remains important.
For estates between $15M and ~$30M: The pressure is off. Before OBBBA, a $20M estate faced meaningful federal tax exposure if the TCJA sunset reverted the exemption to ~$7M. Now, a single person with $15M transfers entirely tax-free, and a married couple up to $30M transfers tax-free with portability. The urgency to gift early, fund irrevocable trusts immediately, or accept illiquidity constraints ahead of a deadline has evaporated for most filers in this band.
For estates above ~$30M married / ~$15M single: Planning still matters — but the strategies are the same as before, just without a deadline. The 40% marginal rate on amounts above exemption is identical, so every dollar of lifetime gifting (using annual exclusions), trust-based transfers (GRATs, IDGTs, SLATs), and charitable techniques (CRTs, CLATs) still compounds in heir’s favor. The difference: you can now plan over a 10–20 year horizon rather than squeezing transfers into 2024–2025.
Strategies That Still Matter
1. Annual Exclusion Gifting
You can give $19,000 per recipient per year (2025 and 2026) without reducing your lifetime exemption. A married couple with four adult children and eight grandchildren can transfer $38,000 × 12 = $456,000 per year entirely tax-free. Over 20 years, that compounds to $9.12M of principal plus any appreciation — all outside the taxable estate.
2. Direct Tuition and Medical Payments
These are never subject to gift tax if paid directly to the institution or provider. Grandparents funding grandchildren’s college tuition or covering medical bills can move meaningful wealth without touching either annual or lifetime exemptions.
3. Step-Up in Basis
Assets held until death receive a step-up in cost basis to fair market value on the date of death. With the $15M exemption permanent, the trade-off between lifetime gifting (carryover basis) and holding until death (step-up basis) has tipped somewhat toward holding — especially for highly appreciated positions. Heirs inheriting a $500,000 stock position with $50,000 cost basis get $450,000 of unrealized gain wiped out.
4. Portability Election
Still critical. On the first spouse’s death, the unused exemption transfers to the surviving spouse only if Form 706 is filed — even if no estate tax is owed. Missing this election permanently forfeits up to $15M of exemption. Deadline is 9 months after death (or 15 months with extension).
5. State Estate Tax Planning
Federal permanence does nothing for the 12 states plus DC with their own estate taxes. A Massachusetts resident with a $3M estate faces state estate tax despite being far below the federal $15M. Connecticut now matches the federal exemption (also rising toward $15M alignment), but New York’s $7.16M threshold, Oregon’s $1M cliff, and Washington’s $2.2M threshold remain pressure points that federal law does not touch.
6. Irrevocable Life Insurance Trusts (ILITs)
If you own your life insurance policy, the proceeds are included in your estate. An ILIT removes those proceeds from your taxable estate while providing liquidity to pay estate taxes or equalize inheritances. Still useful even under OBBBA, particularly for estates expected to approach or exceed $15M.
What “Use It or Lose It” Advice Now Looks Like
If you made large gifts or funded SLATs in 2024 or 2025 specifically to lock in the higher exemption before sunset, those transfers are not reversed — they stand. What changes is that you would not need to make the same gift today under the same urgency. Future planning can proceed at a more measured pace, and the calculus around illiquidity, loss of control, and creditor protection of irrevocable transfers can be weighed without the deadline pressure.
Practical reading: if your 2024–2025 gifting meaningfully reduced your liquid estate and you are now regretting the illiquidity, the strategies are done — consult your attorney about whether intra-family loans, trust distributions permitted by the trust agreement, or decanting can partially restore flexibility. If you were considering but had not yet executed a large lifetime gift, the pressure is off; work with your advisor on a 10-year gifting plan rather than a one-shot transfer.
Key Takeaway
OBBBA replaced a scheduled exemption drop with a permanent $15M ($30M married with portability) baseline, and removed the deadline-driven urgency that dominated 2024–2025 estate planning. Core strategies — annual exclusion gifting, direct tuition/medical payments, portability elections, state estate tax planning, and trust-based transfers for the largest estates — remain valuable, but they can now be deployed over a long planning horizon rather than sprinted against a sunset clock. If your estate is below $15M single / $30M married, federal estate tax is no longer a binding concern; focus your planning on state estate taxes, step-up in basis, beneficiary designations, and liquidity for heirs.