In July 2025, Congress approved the One Big Beautiful Bill Act (OBBBA), permanently setting the federal estate and gift tax exclusion at $15 million per person (indexed for inflation). For married couples, that means a combined $30 million can now be transferred during life or at death without incurring federal estate or gift tax.
That update has eased the urgency many families felt to “use” their lifetime exemption before the previously scheduled 2026 sunset. But it hasn’t changed the underlying principles of good planning — especially when it comes to trusts and strategic gifting.
1. Lifetime Gifting Still Matters
Even with the higher exemption, gifting during life remains one of the most effective ways to reduce future estate taxes. When you gift assets now, you not only remove their current value from your taxable estate — you also remove all future appreciation.
For example, a $3 million transfer to a trust today that doubles in value over time effectively removes $6 million (not just $3 million) from your estate.
Each year, you can also make annual exclusion gifts — up to $19,000 per recipient(for 2026) — without using any of your lifetime exemption.
2. Revocable vs. Irrevocable Trusts
• A Revocable Trust doesn’t reduce estate taxes — it’s a planning tool for probate avoidance, incapacity, and privacy. The grantor retains full control, and the assets remain part of the taxable estate.
• An Irrevocable Trust, on the other hand, is designed to remove assets from your estate permanently. Transfers to such trusts are treated as gifts — typically reported on IRS Form 709 — and are covered by your lifetime exemption.
3. The Role of Dynasty Trusts
A Dynasty Trust allows you to transfer significant wealth — often using your full $15 million exemption — into a structure that can last for multiple generations, free of additional estate or gift tax.
These trusts are particularly valuable for families with closely held businesses or illiquid assets. The use of valuation discounts (for lack of marketability and control) can further increase the efficiency of the transfer.
4. Don’t Forget the ILIT
If you hold significant life insurance, the death benefit may be included in your taxable estate if you own the policy personally.
An Irrevocable Life Insurance Trust (ILIT) solves this problem. By having the ILIT own the policy, you remove the death benefit from your estate entirely. The ILIT can be funded each year with small gifts to cover the premiums — often made tax-free through Crummey Notices.
5. Next Steps: Planning Under the New Rules
Even though the exemption has now been made permanent, planning shouldn’t stop.
Changes in political control, state tax laws, or personal circumstances can quickly shift the landscape.
For most families, a good strategy still includes:
• Reviewing all existing trusts and ownership structures;
• Coordinating valuations of private business or partnership interests; and
• Ensuring trust administration and filings (Form 709, EINs, Crummey notices, etc.) are current.
The new $15 million exemption offers breathing room — but not a reason for inaction.
Effective estate planning is less about reacting to tax thresholds and more about building structures that protect, manage, and transfer family wealth intelligently over time.
