by Anthony KratzChanges to the Federal Estate Tax Under the “One Big Beautiful Bill Act”
After years of uncertainty in the estate planning world, the recently passed One Big Beautiful Bill Act (OBBBA) brings notable changes to federal estate, gift, and generation-skipping transfer (GST) tax laws. The most significant of these is a permanent doubling of the estate tax exemption. This change could reshape planning strategies for high-net-worth individuals and families. Here’s what you need to know:
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The Doubled Exemption is Now Permanent
The estate and gift tax exemptions were temporarily doubled under the Tax Cuts and Jobs Act (TCJA) of 2017, with the expectation that they would “sunset” at the end of 2025. This uncertainty created a ticking clock for many families and estate planners. With the passage of the OBBBA, the doubled exemption is now permanent. This means that individuals and families can continue to plan with greater confidence, knowing that the elevated thresholds will not disappear after 2025.
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Estate Tax Exemption Will Rise to $15 Million Per Person in 2026
Effective January 1, 2026, the federal estate, gift, and GST tax exemptions will increase to $15 million per individual—up from $13.61 million in 2025. For affluent families, this adjustment extends the planning window for transferring wealth without triggering estate taxes. Remember, the estate tax is a “transfer tax,” and transfer taxes apply to gifts made during an individual’s lifetime as well as transfers by their estate after death. The estate and gift tax exemptions are unified, so any gift tax exemption used during an individual’s life will reduce the exemption available for their estate.
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Inflation Indexing Will Continue
The new exemption amount will be indexed for inflation, ensuring it keeps pace with economic changes. This was already a feature of the estate tax code, but the OBBBA confirms that the increased exemption will continue to have annual adjustments. This inflation indexing provides a more predictable framework for long-term planning—helping individuals and estate planners better forecast how much wealth can be transferred tax-free in future years. This is especially important for complex trust structures, gifting strategies, and family business succession plans.
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Higher Threshold for Estate Tax Liability
Under the OBBBA, individuals with estates valued below $15 million will owe no federal estate tax. For married couples who employ proper estate planning strategies, this threshold doubles to $30 million. This significantly reduces the number of estates subject to federal estate tax liability, leaving only a small fraction of U.S. estates taxable at the federal level. However, state-level estate taxes may still apply. For instance, Maryland’s estate tax exemption is currently $5 million, which could result in state-level taxation despite the increased federal exemption.
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The Estate Tax Rate Remains at 40%
While the exemption amount has increased, the top federal estate tax rate remains unchanged at 40%. This means that estates exceeding the $15 million (or $30 million) exemption will still be subject to the 40% tax rate on the amount that exceeds the exemption. While large estates may face substantial tax liabilities, the higher exemption allows more wealth to pass tax-free before the tax rate applies.
What Should You Do Now?
The changes in the One Big Beautiful Bill Act present an opportunity for families to revisit and refine their long-term estate planning strategies. This is a great time to review existing estate plans to ensure they fully leverage the new exemption levels. High-net-worth families may also want to consider gifting strategies or revisit their trust structures—such as dynasty trusts or spousal lifetime access trusts (SLATs)—to lock in long-term tax benefits. Remember, state estate tax laws vary, and some states may not align with federal changes, so be sure to consider local laws when planning.
by Anthony KratzWhat is a Financial Power of Attorney and why might you need one?
Life is full of the unexpected — an illness, an accident, or even just the realities of aging can leave you temporarily or permanently unable to manage your finances. If that happens, having a trusted person who is legally empowered to act on your behalf can make a big difference. That’s where a Financial Power of Attorney (POA) comes in. But a POA is not just for the elderly or seriously ill—it’s a smart, proactive step for adults of any age.
A Financial Power of Attorney is a legal document that allows you (the “principal”) to authorize someone else (the “agent” or “attorney-in-fact”) to manage your financial affairs. This can include anything from paying bills and managing investments to filing taxes and handling real estate transactions.
A POA is a critical part of any estate planning strategy because it allows continuity of managing your finances in case of incapacity. If you become ill, injured, or are otherwise unable to handle your own finances, a POA ensures that someone you trust can step in immediately to keep your affairs in order—without delays, court involvement, or confusion.
By formally appointing someone you trust, you reduce the risk of others stepping in without your consent or knowledge, especially during times when you’re vulnerable or unable to communicate clearly. Without a POA in place, your family may have to go through a lengthy and often expensive court process to be appointed as your guardian. A POA helps bypass this and gives clear legal authority to your chosen agent.
Even if you are not incapacitated, a POA may be useful if you are traveling, deployed, or just want help managing your finances. Your agent can deposit checks, sign documents, or handle transactions on your behalf.
The person you choose as your agent should be someone responsible, trustworthy, and capable of handling financial matters. It could be a family member, close friend, or even a professional fiduciary. It’s also a good idea to name a backup agent, just in case your first choice is unavailable when needed.
Speak with a legal or estate planning professional to draft a POA tailored to your needs and to ensure it complies with your state’s laws. It’s an easy but important step that can prevent big problems down the road.
by Anthony KratzShould I Choose a Will or a Living Trust?
One of the most frequent questions that I am asked is whether it is better to have a will or a living trust. What are the differences between them and which one is right for you?
While both a will and a living trust are tools for distributing your assets after you pass away, they function differently and have key differences that may affect how your estate is managed.
A will is a legal document that specifies how your assets will be distributed after your death. It also designates a personal representative (sometimes called an executor) to manage your estate. If you have minor children, a will should also nominate a guardian for them. After you pass away, a will must go through probate, which is the court-supervised process that can be time-consuming and add expenses. Additionally, probate is a public process, meaning anyone can access your will, estate inventory, and other documents once they are filed with the courts.
A living trust can serve as a substitute for a will. A trust is a legal arrangement in which you transfer assets to a trustee, who manages those assets for the benefit of your beneficiaries. Often you will serve as your own trustee, and you will also be the primary beneficiary during your lifetime. One of the key advantages of a trust is that it provides a management structure for your assets during your lifetime, so that your selected successor trustee can manage the trust for you, if you are no longer able to manage your financial affairs yourself. After death, the assets held in a trust can pass to your beneficiaries without probate, meaning your estate can be distributed quickly and privately. Trusts can also offer more control over how assets are managed and distributed to your beneficiaries, and they can address things like disability planning or care for minor children.
Which Option Is Best for You?
A will is usually a simpler document and may be a good option for smaller estates or situations where distributions are expected to be straightforward. A trust, though more complex, provides privacy, avoids probate, and offers greater control over your assets during life and after death.
To make an informed decision about your estate plan, it is important to consult with a knowledgeable estate planning attorney who can evaluate your specific needs and guide you in choosing the best option for your situation.
