As we mentioned in a previous article, the 2025 passage of the One Big Beautiful Bill Act (OBBBA) created opportunities for those with significant estates, among others. By making permanent a $15 million exemption from federal estate taxes (for individuals; $30 million for married couples filing jointly) and indexing the higher limit for inflation, the legislation provides significant relief for more than 99% of estates in the US. On the other hand, the new, higher federal exemption may have made some previous estate planning strategies less advantageous. Additionally, Illinois residents face a much-lower estate threshold for estate taxation ($4 million in 2026, not portable for spouses, as with the federal exemption).
What estate planning moves make sense with the exemption above $15 million?
Though it is possible that at some point in the future the exemption limits could be changed by new legislation (estate tax changes have occurred more than a dozen times in the past century), most estates can probably rely on the historically high level currently in place. But that doesn’t mean that estate planning in 2026 should go on “autopilot.” With the new, higher exemption limits in place, persons with larger estates may need to turn their attention to other areas of focus to ensure that their wealth transfer plans take full advantage of existing law.
Generally, OBBBA has moved the focus toward trusts designed to limit the estate’s tax responsibility for future growth in asset values and to facilitate a more efficient wealth transfer process for future generations.
Family trusts. One way that many larger estates are strategically leveraging the new, higher exemption is by the creative use of various family trusts. For larger estates, qualified estate-planning counsel may evaluate strategies such as GRATs, IDGTs, SLATs, and other irrevocable trusts. Depending on the strategy and how it is structured, these techniques can potentially move some future appreciation outside of the grantor’s taxable estate. Please note, however, that tax treatment, access to assets, valuation requirements, and other consequences vary significantly by strategy.
Should I still make lifetime gifts if the exemption is permanent?
Individuals still have access to the annual federal gift tax exclusion of $19,000 per recipient in 2026. Eligible gifts within the annual exclusion generally do not use the donor’s lifetime gift and estate tax exclusion. Larger gifts do not necessarily result in current gift tax, but they may require a gift-tax return and may use a portion of the donor’s lifetime exclusion.
- Gifted assets reduce the size of the taxable estate: beneficial to estates that are below the exemption threshold now but may exceed it in the future due to asset appreciation;
- Future growth in assets occurs outside the taxable estate of the donor;
- Because it is indexed for inflation, an annual gifting program can enhance the impact of future giving.
However, persons using the exclusion should also take into account that gifting appreciated assets can involve an income-tax tradeoff; recipients generally receive the donor’s carryover basis, while inherited assets generally receive a basis adjustment at the death of the donor.
What about Illinois state taxes?
As mentioned, the federal exemption is considerably higher than the $4 million threshold faced by Illinois estates (we also discuss this in a previous article). Though the marginal rates in Illinois (ranging from 0.8% to 16%) are much lower than the federal brackets (18-40%), they are imposed at a much lower level. Because the Illinois exclusion is substantially lower than the federal exclusion, Illinois residents with potentially taxable estates may want to discuss state-specific gifting and trust strategies with their estate-planning attorney, CPA, and financial advisor.
How often should I review my estate plan after a tax-law change?
While the basics of good estate planning remain consistent, it’s always valuable to re-examine the strategy periodically. In a best-case scenario, careful review of all estate planning documents (and beneficiary designations on life insurance policies, annuities, and retirement accounts) should occur annually. Certainly, following major changes imposed by legislation, it is even more important to go over estate planning strategy and documents to ensure that the plan is providing the maximum benefit allowed by current laws. But even beyond legislative considerations, any major life change—marriage, divorce, birth of a child, death of a family member, relocation, or even major changes in business ownership—should trigger a careful review of estate plans and documents.
Your Rothschild advisor can help evaluate how your estate plan fits with your broader financial strategy and coordinate with your attorney and tax professional when changes may be appropriate. We are eager to help you find the answers you need; please let us know how we can help.
