Understanding the Big Beautiful Bill’s Estate Tax Provisions

In early July, President Trump signed the One Big Beautiful Bill Act into law. The sweeping tax legislation makes permanent many of the provisions of the 2017 Tax Cuts and Jobs Act (TCJA) while adding new deductions. Two areas of particular interest to families and business owners are the Act’s individual income‑tax provisions and its overhaul of the federal estate, gift and generation‑skipping transfer (GST) tax exemptions.

Estate, Gift and GST tax changes

The TCJA doubled the lifetime federal estate and gift tax exemption to $13.99 million per person, but those amounts were scheduled to revert to approximately $7 million at the end of 2025, creating a “use it or lose it” dilemma for clients considering large lifetime gifts. The Big Beautiful Bill resolves that uncertainty: beginning Jan. 1, 2026, the Act permanently increases the federal estate, gift and GST tax exemptions to $15 million per individual ($30 million per married couple). This amount also applies to the Generation Skipping Transfer Tax (GSTT). These amounts will be indexed for inflation starting in 2027. Unused estate and gift tax exemptions remain portable between spouses, and the top marginal estate and GST tax rate continues to be 40 percent. The annual gift tax exclusion currently stands at $19,000 per donee for 2025.

Because the exemption increase is permanent, there is no longer a sunset date on today’s historically high exemption. Nevertheless, Congress can change the law again; therefore, lifetime gifting remains a valuable tool for clients with large estates. Pennsylvania does not impose a state estate tax, but it does assess an inheritance tax on most transfers at death. The federal changes do not affect Pennsylvania inheritance tax.

Planning considerations

For estate planning, the permanent increase of the federal exemptions to $15 million per individual eliminates the year‑end cliff that previously encouraged large lifetime gifts. Clients who maximized their exemptions under the TCJA will receive the benefit of a higher exemption amount in 2026. The IRS previously confirmed that any potential future reductions in the exemption will not claw back gifts made from 2017 through the end of 2025. However, because Congress can revisit these exemptions in the future, high‑net‑worth individuals should continue to evaluate lifetime gifting strategies.

As always, these provisions will depend on each taxpayer’s circumstances. The estate planning attorneys at McCormick Law Firm are available to help clients understand how the Big Beautiful Bill may impact their personal and business planning and to develop strategies that take advantage of the new law.