One Big Beautiful Bill Act: Major Estate and Gift Tax Changes Enacted
Over the Fourth of July weekend, the One Big Beautiful Bill Act (OBBBA) was officially signed into law, ushering in sweeping changes that will impact millions of Americans. Chief among them: a permanent increase in the federal estate and gift tax exclusion.
What Is the Estate and Gift Tax?
The United States uses a unified estate and gift tax system. This means a single exclusion amount applies to both lifetime gifts and transfers at death. Individuals receive a “unified credit”—also known as the applicable credit amount—which offsets taxes owed on these transfers.
The IRS doesn’t charge estate or gift tax if the total value of taxable gifts and estates remains below the exclusion threshold. For transfers above that amount, the IRS applies a flat 40% tax rate.
A Look Back: How We Got Here
Since 1997, the estate and gift tax exemption has grown dramatically—from just $600,000 to nearly 25 times that amount today. Much of this relief stems from provisions in the 2017 Tax Cuts and Jobs Act (TCJA), which temporarily doubled the basic exclusion amount from $5 million to $10 million per person, indexed for inflation.
As of 2025, the inflation-adjusted exclusion stands at $13.99 million per person. However, that amount was set to sunset at the end of 2025, reverting to about half the current level (approximately $7 million, also indexed for inflation).
Estate tax rates have also changed significantly over time. In 1942, estates faced rates as high as 77%—at a time when the exclusion was just $60,000 per person. Since then, the top rate on taxable transfers has gradually declined, landing at 40% today.
In recent years, lawmakers transformed estate tax law by introducing portability, which allows a surviving spouse to use a deceased spouse’s unused estate tax exemption.
This provision, first introduced in 2010 under the Tax Relief, Unemployment Reauthorization, and Job Creation Act, remains in effect today. However, portability is not automatic. To take advantage of a deceased spouse’s unused exclusion, the surviving spouse must file a federal estate tax return (Form 706) and elect portability—typically within nine months of the decedent’s death. This practice of “porting over” the unused exemption can lead to substantial estate tax savings that would otherwise be lost.
Get our Guide:
A Beginner’s Guide to Estate Planning
What’s New Under OBBBA?
The OBBBA makes a permanent change to the estate and gift tax landscape:
- New Exclusion Amount: Increased to $15 million per person.
- Effective Date: Applies to estates and gifts made after Dec. 31, 2025.
- Indexed for Inflation: The exclusion will continue to rise with inflation.
This change overrides the sunset provision of the TCJA provisions, which would have reduced the exclusion to roughly $7 million (adjusted for inflation) starting in 2026. Instead, the OBBBA more than doubles that amount—locking in higher exemption levels while maintaining the historically low 40% estate tax rate on transfers above the exclusion.
With this change, most family business owners, family farmers, and even many affluent Americans will no longer face the complexities and burdens of the federal death tax.
Can I Give Gifts Without Using My Lifetime Estate and Gift Tax Exemption?
Absolutely. Taxpayers still benefit from the annual gift tax exclusion, which remains separate from the lifetime exemption.
For 2025, the annual exclusion is $19,000 per recipient, up from the long-standing $10,000 base amount due to inflation adjustments. That means you can give $19,000 to each person without reducing your $15 million lifetime exemption.
For example, if you give $19,000 to each of your three children, you’ve transferred $57,000 tax-free—and your lifetime exemption remains untouched.
It’s important to note that if you gift more than the annual exclusion amount to any one individual in a given year, you must file IRS Form 709 (Gift Tax Return). Although you may not owe any tax, filing this form tracks the reduction in your lifetime exemption.
What This Means for You
These changes may warrant a reassessment of your estate planning strategy, especially if you created your plan under previous exemption thresholds. If you haven’t updated your estate strategy in the last 10 to 15 years—when the estate tax exemption was roughly one-third of what it is today—it may be time for a fresh look.
What’s changed? In many cases, income tax planning, asset protection, and flexible trust design have taken center stage. Your beneficiaries may now have new options for accessing trust principal and income in ways that better support their financial goals.
At Savant Wealth Management, we’re here to help you navigate these changes. Contact us to discuss how recent legislative changes may affect your estate planning strategy and long-term financial objectives.
Sources:
https://www.schwab.com/learn/story/how-portability-helps-couples-reduce-estate-taxes
https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax
Savant Wealth Management (“Savant”) is an SEC registered investment adviser headquartered in Rockford, Illinois. This material is intended for informational purposes only and should not be construed as personalized tax, legal, or financial advice. Please consult your investment and financial professional(s) regarding your unique situation.
Michael T. Cyrs
Senior Director of Wealth Transfer
JD, CFP®, MBA