Signed into law on July 4th is a significant development that will affect estate planning and gift taxes for years to come. President Trump and the Republicans promised they would deliver on this campaign promise. The “Big Beautiful Bill,” as it is called, includes provisions that affect estate and gift taxes by extending the 2017 Tax Cuts and Jobs Act.
Before this legislation was signed, the federal estate and gift tax exemption was set to sunset at the end of this year, 2025. The exemption was scheduled to drop and reduce the federal estate tax exemption to $5 million. Now, beginning January 2026, the legislation increases the lifetime gift, estate, and generation-skipping transfer tax to $15 million. This will have a significant impact on high-net-worth individuals, business owners, and real estate investors. The exemption now stands at $15 million per individual and $30 million per married couple. A Federal estate tax return is filed when the first spouse passes. The individual exemption is subject to annual inflation adjustments, which are likely to increase.
This will enable more families and individuals to transfer a greater amount of wealth before being subject to federal estate taxation. Despite this change in federal tax legislation, some states impose their estate taxes, such as New York, Maryland, Connecticut, and DC. The Maryland exemption is $5 million, and DC is $4.8 million.
These days, estate planning has little to do with estate taxes, and only 1% of us will have $15 million or more to pass to our heirs. Whether you fit in this bracket or not, the most critical component of estate planning is determining who will make medical, financial, parental, and business decisions for you if you cannot do so, to whom, how, and when your assets will be distributed at your death and building upon your legacy.
In addition to the federal estate exemption, many other changes were made permanent. We will examine other changes, such as to 529 plans and charitable giving deductions in a future blog.
The attorneys on the estate planning team at Altman & Associates bring together significant experience and expertise in tax to support clients with their personal and business planning needs. We can be reached at 301-468-3220 or on our website at altmanassociates.net.
