On July 4, 2025, in addition to celebrating American independence, President Trump signed into law what is commonly referred to, unofficially, as the One Big Beautiful Bill Act (the Act), which extends and solidifies many provisions of the 2017 Tax Cuts and Jobs Act (TCJA, originally enacted by President Trump in 2018 during his first term) and makes significant changes to the Internal Revenue Code and federal tax law. The Act was passed by both the Republican-majority House and Senate after much reform and with a narrow voting margin. The Act is massive — about 870 pages in length — and includes sweeping reforms for taxes, spending and deductions, to name a few.

Let’s focus specifically on how this Act may affect your current estate plan and what, if any, changes you may want to consider making to your estate plan in the near future.

Big changes to the federal estate and gift tax exemptions

The Act makes permanent the federal estate and gift tax exemptions amounts under the TCJA. In 2025, the federal estate tax exemption is at an all-time high of $13.99 million per person. Starting in 2026, the federal estate tax exemption will be $15 million per person and will increase each year thereafter, indexed for inflation. The Act resets the “base” from which future inflation adjustments are calculated after 2026. This increase is indeed permanent. There is no sunset or expiration date included in the Act; the base can only decrease by a future act of Congress and the President specifically reducing the exclusion amount.

What does this mean and how does it help/hinder?

Prior to the passage of the Act, the federal estate tax exemption was set to sunset on January 1, 2026, and drop back down to pre-TCJA rates (i.e. $5 million per person indexed for inflation), which most estate planners estimated to be around $7.2 million per person. The Act not only prevents this reduction but makes the heightened exclusion permanent.

The Act effectively reduces the dollar amount of any federal estate tax exposure after your death and increases the money that passes to your heirs. Think of the federal lifetime exemption amount as a “coupon.” Each U.S. citizen or permanent resident can use or “turn in” their coupon at any time during their life to remove or shelter gifted assets. Any amount of the coupon unused as of the date of death is utilized to pass remaining assets onto loved ones. If the taxable estate upon date of death exceeds the amount of your remaining coupon, the excess amount is subject to a federal estate tax at a rate of 40%. The Act increases your “coupon” starting in 2026 allowing a married couple to remove up to $30 million from their gross taxable estates during their lifetimes.

Do I need to change my estate plan?

Estate planning is still critically important to provide asset protection, avoid probate and implement gifting programs to reduce taxable estates. The Act does not affect your foundational estate planning documents, i.e. a Last Will and Testament, Power of Attorney for Property, Power of Attorney for Health Care and/or Revocable Trust.

If you have already made gifts this year or past years totaling close to the exemption amount, you will have the opportunity to gift more in 2026, up to $15 million, to shelter assets from estate and gift tax. Gifting now (rather than waiting until death) removes not just the current asset value but also all future appreciation value from your taxable estate, thereby materially reducing estate taxes and preserving your “coupon” exemption. When making gifts, consider gifting to an irrevocable trust for greater asset protection and strategic positioning of income for income tax efficiencies.

High net worth individuals have some additional time to examine different strategies to implement to reduce or eliminate federal estate tax liabilities. Although there is no longer a sunset deadline of 12/31/2025 to contend with, we don’t necessarily have unlimited time for planning. You should take advantage of the current law and strategize with an estate planning attorney from our Estate Planning & Asset Protection team here at Chuhak & Tecson and implement estate tax reduction strategies to remove appreciable assets from your estate just in case the law changes in the future.

For most Americans with modest estates, this increase will reduce potential federal estate taxation to zero or nearly zero.

A word of caution – Although the federal estate and gift tax exemption is increasing, the Illinois estate tax exemption remains the same (at $4 million per person) so there are plenty of estate planning opportunities for Illinois residents to reduce their Illinois taxable estates.