The Bottom Line
- The One Big Beautiful Bill Act eliminates the TCJA's 2026 sunset provision, and it permanently increases the federal lifetime gift, estate and generation-skipping transfer tax exemptions to $15 million per person (or $30 million for married couples) starting January 1, 2026, with future increases indexed for annual inflation.
- People may still wish to use their full exemption amounts sooner rather than later, in case the increased exemptions under the One Big Beautiful Bill Act are reduced or repealed by a future administration.
- We encourage clients to consult with their Private Client Services attorney to evaluate their estate plans in light of these developments.
The recently enacted One Big Beautiful Bill Act has brought about significant changes to the long-term estate planning landscape by permanently increasing the federal lifetime gift, estate and generation-skipping transfer tax exemption amounts. These developments offer both immediate planning opportunities and longer-term certainty for individuals and families.
2025 Federal Exemption and Exclusion Amounts
Effective January 2025, the federal lifetime gift, estate and generation-skipping transfer tax exemption is currently:
- Individual: $13.99 million
- Married Couples: $27.98 million
For individuals who fully used their $13.61 million exemption in 2024, this means an additional $380,000 of available exemption in 2025 (or $760,000 for married couples).
The annual federal gift tax exclusion also increased to:
- Individual: $19,000 per recipient
- Married Couples: $38,000 per recipient for married couples electing gift-splitting
Major Federal Change: One Big Beautiful Bill Act
Signed into law on July 4, 2025, the One Big Beautiful Bill Act permanently increased lifetime gift, estate and generation-skipping transfer tax exemptions that were temporarily increased under the Tax Cuts and Jobs Act (TCJA) in 2017. Beginning January 1, 2026, the federal exemption amounts will rise to (indexed for annual inflation):
- Individual: $15 million (increase of $1.01 million of available exemption compared to 2025)
- Married Couples: $30 million (increase of $2.02 million of available exemption compared to 2025)
This change repeals the TCJA's sunset provision, which would have reduced the exemption to approximately $7 million per person in 2026. This means there is no longer a "use it or lose it" urgency before the end of 2025. However, many high-net-worth individuals may still benefit from making strategic gifts now to "lock in" asset growth outside their estates.
Taxes at the State Level
New York
New York uses a different calculation for its estate tax exemption and will not be affected by the One Big Beautiful Bill Act's changes. For 2025, the New York State estate tax exemption increased to $7.16 million per person, also indexed for annual inflation. New York does not have an inheritance or gift tax, but it does have a three-year clawback period for gifts, meaning that any taxable gifts made within three years of a New York resident's death will be retroactively included in the decedent's estate for the calculation of estate taxes. New York also has a "cliff tax." Estates exceeding the New York estate tax exemption by more than 5% may lose the exemption entirely.
Unlike the federal exemption, New York does not allow portability (the ability of a surviving spouse to use a deceased spouse's unused estate and gift tax exemption), so New York residents should consider fully leveraging their own exemptions to save on estate tax down the road.
Connecticut
Connecticut continues to match the federal lifetime gift and estate tax exemption, so as of 2025, the Connecticut exemption is also $13.99 million per person. Since Connecticut mirrors the federal exemption amounts, it is expected to follow future inflation increases in lockstep with the federal rates, reflecting the recent changes of the One Big Beautiful Bill Act. Like New York, Connecticut also does not allow portability between spouses; therefore, Connecticut residents should also consider fully leveraging their own exemptions now.
Vision Forward: Planning for the Future
People may still wish to achieve significant tax savings by using all (or a portion of) their exemption amounts sooner rather than later, in the event the increased exemptions under the One Big Beautiful Bill Act are reduced or eliminated by a future administration.
Many people have current estate plans containing gifts or tax-planning strategies based on the federal exemption amounts. Clients should consider reviewing their existing estate planning documents in light of these recent and upcoming developments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
