Here’s what you need to know now.
The landscape of estate planning may shift dramatically if the GOP’s new tax bill, dubbed the “One Big Beautiful Bill Act,”—makes it through Congress. The proposed legislation includes permanent increases to the federal estate and gift tax exemption and adjustments to the Alternative Minimum Tax (AMT), both of which could reshape how families structure their estate plans moving forward.
A Quick Refresher: What’s at Stake?
Under current law, the federal estate tax exemption is set at $13.99 million per person (or $27.98 million for married couples). These generous limits stem from the 2017 Tax Cuts and Jobs Act (TCJA) and are scheduled to sunset at the end of 2025, halving the exemption back to around $7 million per person unless new legislation intervenes.
The GOP proposal doesn’t just aim to extend the TCJA limits—it goes further:
- Proposed New Exemption:
- $15 million for single filers
- $30 million for married couples
- $15 million for single filers
- Effective Date: These elevated levels would take effect in 2026 and become permanent, providing long-term certainty for high-net-worth individuals and families.
What This Means for Your Estate Plan
Most clients at Estate Planning Law Center won’t need to worry about estate taxes under these proposed thresholds. However, for families with estates nearing or above the current limits—or for those considering gifting strategies—the potential changes still warrant attention.
If passed:
- You may no longer feel the urgency to gift assets now to stay below the exemption.
- You may want to hold appreciated assets in your estate to allow your heirs to benefit from a step-up in basis, potentially avoiding capital gains tax if they later sell the assets.
- Strategies focused on avoiding estate tax (like complex trusts or early transfers) may become less critical than those focused on wealth preservation and flexibility.
What About the Alternative Minimum Tax (AMT)?
The AMT is designed to ensure high-income individuals pay at least a minimum level of tax, even after deductions and credits. Under the TCJA, AMT thresholds were raised significantly, and the GOP bill would make those changes permanent.
Proposed Changes Include:
- Increased Exemption Levels (2025 projections):
- $88,100 for single filers
- $137,000 for married couples
- $88,100 for single filers
- Increased Phase-Out Thresholds:
- $626,350 for single filers
- $1.25 million for married filing jointly
- $626,350 for single filers
- Fewer taxpayers would remain subject to the AMT under the proposed changes, further simplifying tax planning for many families.
Don’t Forget About State Estate Taxes
While the federal exemption may rise, state laws still matter. Several states impose their own estate or inheritance taxes, often with much lower thresholds.
For example:
- Nebraska imposes inheritance tax starting at $100,000 for adult children.
- In Kentucky, nieces and nephews may face tax with only a $1,000 exemption.
If you live in a state with lower thresholds, your estate may still owe taxes, even if you fall well below the federal limit. In some cases, relocating to a more favorable tax state could be a strategic decision. However, cost of living, property taxes, and family considerations also play a role.
So, What’s Next?
The proposed bill has passed the House but still needs Senate approval. Revisions are likely, and final passage remains uncertain. That said, the direction is clear: the GOP favors permanently higher estate and AMT exemptions, which could significantly impact long-term estate planning strategies. You may get in touch with us to discuss in more detail.
New administration in DC often brings new rules, and your assets may be at risk.
Tax exemptions, reduction in Medicaid benefits, gifting limits, and capital gains treatments are all areas that may shift.
