By Paul Bullock
Federal estate tax exemptions are changing in 2026 following the passage of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025. This legislation replaces the previously scheduled sunset provisions with new permanent rules. Whether these changes affect your estate depends on your individual circumstances, but all families with significant assets should review their planning strategies in light of the new law.
What Changed with the OBBBA
Prior to the Tax Cuts and Jobs Act (TCJA) of 2017, the federal estate and gift tax exemption was $5 million per person, indexed for inflation. The TCJA doubled that baseline to $10 million. As of 2025, the inflation-adjusted exemption stands at $13.99 million per individual, effectively $27.98 million for married couples with proper planning.
The TCJA included a sunset provision that would have reduced the exemption back to approximately $7 million starting January 1, 2026. This created urgency that prompted many families to pursue aggressive gifting and trust strategies.
The OBBBA dramatically changed this outlook. Rather than facing a reduction, the estate and gift tax exemption will increase to $15 million per person beginning January 1, 2026. Unlike the TCJA increase, there is no sunset provision, this change is permanent. Starting in 2027, the exemption will be indexed for inflation.
Why Estate Planning Still Matters
Despite the higher exemption and removal of the sunset provision, estate tax planning remains essential for several reasons:
- The 40% federal estate tax rate is significant. Business owners, real estate investors, and those with concentrated stock positions may still face exposure.
- State level taxes can impact estates. While Indiana residents benefit from no state estate or inheritance taxes, property in other states may be affected.
- Legislative changes remain possible. Congress can amend or repeal tax laws at any time. Building flexibility into your estate plan helps you adapt.
- Estate planning goes beyond taxes. It addresses ensuring your wishes are carried out, protecting beneficiaries, providing for loved ones with special needs, and supporting charitable causes.
Planning Opportunities Under the New Law
The current environment presents valuable opportunities to optimize wealth transfer strategies:
Lifetime Gifting Strategies
By making gifts now, you can remove future appreciation from your taxable estate. This approach is particularly beneficial for assets with strong growth potential, such as business interests, real estate, or concentrated stock positions. The annual gift tax exclusion for 2025 is $19,000 per recipient, allowing you to transfer wealth without using your lifetime exemption.
Trust Strategies
Trust strategies continue to offer robust benefits for wealth preservation:
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- Spousal Lifetime Access Trusts (SLATs) allow married couples to move assets out of their estates while maintaining indirect access.
- Irrevocable life insurance trusts can remove life insurance proceeds from your taxable estate while providing liquidity for heirs.
- Dynasty trusts enable you to transfer wealth across multiple generations with asset protection benefits.
Charitable Giving
Charitable giving strategies offer both philanthropic fulfillment and tax benefits. Donor advised funds provide flexibility in timing charitable contributions while receiving immediate tax deductions. Charitable remainder trusts allow you to receive income during your lifetime while ultimately benefiting a charity and reducing estate tax exposure.
Action Steps to Take Now
Even with the increased estate tax exemption, now is the time to take action:
- Review your estate plan to ensure documents reflect current law and your intentions. Plans drafted before 2011 may lead to unintended tax consequences.
- Engage qualified advisors to explore trust and gifting strategies tailored to your situation. Estate planning is not one-size-fits-all.
- Stay informed about potential changes through regular conversations with your financial and legal advisors.
Planning with Confidence
The passage of the OBBBA has provided important clarity for families concerned about the estate tax sunset. With a higher, inflation-adjusted exemption now in place permanently, the urgency of “use it or lose it” has diminished. However, the need for proactive, thoughtful estate planning remains as important as ever.
Whether you’re looking to preserve family wealth, support charitable causes, minimize tax exposure, or ensure your wishes are carried out, careful planning is key to achieving your goals. At Wellington Investment Advisors, I work with clients to develop comprehensive estate planning strategies that protect what matters most to you and your family.
Your Financial Future Matters
If you haven’t reviewed your estate plan recently, or if you’re uncertain how the OBBBA changes may impact your situation, contact us today to begin planning around your retirement priorities to help ensure long-term financial stability and confidence. At Wellington Investment Advisors, we’re here to assist you in transforming your retirement dreams into a tangible reality. Don’t hesitate to connect with us: schedule a no-obligation introductory meeting or reach out to me at paul@wellingtoninvestmentadvisors.com or by phone at (812) 333-0874.
About Paul
Paul Bullock is CEO of Wellington Investment Advisors, an independent, boutique fiduciary
firm serving pre-retirees and high net-worth individuals. With over 36 years of financial
experience, Paul is committed to building long-term relationships through thoughtful,
personalized investment advice and guidance. He focuses on a disciplined tactical asset
allocation approach to money management through a strong understanding of economic and market conditions and strives to build trust with clients by providing sound guidance. Paul understands the hard work his clients have put in to arrive at where they are today and wants to see them succeed in their goals for the future. Paul graduated from the University of Texas with an MBA, as well as a bachelor’s degree in finance, and has been dedicated to assisting clients with their financial needs ever since. When he is not working, Paul enjoys time with his family and is also an avid equestrian polo player who helps raise money for over 18 different charities through his playing. To learn more about Paul, connect with him on LinkedIn.
Disclaimers:
Securities offered by Registered Representatives through Private Client Services, Member FINRA / SIPC. Advisory products and services offered by Investment Advisory Representatives through Wellington Investment Advisors, a Registered Investment Advisor. Private Client Services and Wellington Investment Advisors are unaffiliated entities.
Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Wellington Investment Advisors and PCS do not offer tax or legal advice. Always consult a tax or legal professional regarding your specific situation. Individual situations and results can vary. Investment involves risk, and past performance is no guarantee of future results. Diversification does not ensure against loss.