The recently passed One Big Beautiful Bill Act (OBBBA) brought significant changes to tax law. For families engaged in multi-generational planning, these changes present new opportunities that, in our view, are not being fully utilized—possibly due to status quo bias. In this blog, I will review the changes in estate planning laws and how status quo bias may affect decision making.
The changes to pre-2025 and post-2025 estate and gifting laws are summarized below:
Pre-OBBBA Rules (through end of 2025)
- Estate & Gift Tax Exemption:
- $13.99 million in 2025.
- The Tax Cuts and Jobs Act (TCJA, 2017) doubled the previous exemption.
- But it was temporary — scheduled to “sunset” at the end of 2025, cutting the exemption roughly in half (back to ~$6.8 million per person in 2026).
- Generation-Skipping Transfer (GST) Tax Exemption:
- Matched the estate/gift exemption ($13.99 million in 2025).
- Also subject to the TCJA sunset, meaning it would have dropped to about $6.8 million in 2026.
- Not portable between spouses.
- Annual Gift Exclusion:
- $19,000 in 2025.
- Adjusted annually for inflation.
- Top Federal Estate/Gift/GST Tax Rate:
- 40%.
- Portability:
- Surviving spouse could continue to use deceased spouse’s unused exemption (with Form 706).
- Uncertainty:
- Estate planners and families faced a cliff at the end of 2025, creating pressure to complete large lifetime gifts before the sunset.
- Estate planners and families faced a cliff at the end of 2025, creating pressure to complete large lifetime gifts before the sunset.
Given these impending changes, families were under pressure to act before year-end 2025. OBBBA’s passage has fundamentally altered this landscape—yet many families haven’t adjusted their thinking accordingly.
Post-OBBBA Rules (starting Jan 1, 2026)
- Estate & Gift Tax Exemption:
- Permanently raised to $15 million per individual (indexed for inflation thereafter).
- Married couples can shield up to $30 million with portability.
- Eliminates the TCJA sunset risk.
- Generation-Skipping Transfer (GST) Tax Exemption:
- Also $15 million per individual, indexed.
- Still not portable between spouses.
- Annual Gift Exclusion:
- Unchanged by OBBBA (still $19,000 in 2025, with modest inflation adjustments in later years).
- Top Federal Estate/Gift/GST Tax Rate:
- Still 40%.
- Portability:
- Continues as before, via timely Form 706 filing.
- Certainty & Permanence:
- By locking in a high exemption permanently, OBBBA removes the 2026 cliff and provides long-term clarity for estate planning.
- By locking in a high exemption permanently, OBBBA removes the 2026 cliff and provides long-term clarity for estate planning.
These permanent changes eliminate the urgency that drove previous planning decisions, but they also create new opportunities that status quo bias may cause families to overlook. These include:
- No more end-of-2025 rush: OBBBA eliminates the pressure to make large gifts or estate transfers before the 2025 expiration of the TCJA’s doubled exemption.
- Long-term clarity: Families and advisors can now plan with clarity, knowing the higher exemption threshold is in place (unless altered by new legislation).
- Review existing estate plans: Many documents—trusts, wills, and trusts referencing exemption figures—were drafted under older, lower thresholds and may require updates to ensure your intentions are correctly carried out.
- State-level implications matter: Federal changes do not override state estate or inheritance taxes, which often have much lower exemptions and different rules (e.g., New York, Washington, Oregon).
- Strategic gifting still matters: While immediate urgency may have eased, lifetime gift strategies (especially for appreciating assets) remain powerful tools to reduce taxable estates and transfer future gains outside one’s taxable estate.
In conversations with clients over the past two months since OBBBA’s passage, we’ve noticed a pattern: families who were actively engaged in year-end 2025 planning have largely paused their efforts, assuming the new law eliminates the need for action. This reflects classic status quo bias—the tendency to stick with current arrangements even when better options emerge.
The scientific principle of inertia bears intuitive similarity to status quo bias; it states that a body at rest shall remain at rest unless acted upon by an outside force. This indeed may explain the delay in reacting to the new provisions in the OBBBA.
Specific Actions to Consider:
- Review trust funding levels: Many grantors designed Trusts around the lower pre-TCJA exemptions and may now be underfunded relative to the new $15 million threshold.
- Reassess generation-skipping strategies: The permanent $15 million GST exemption creates new opportunities for multi-generational wealth transfer.
- State tax planning: With federal exemptions now higher, state-level estate taxes become proportionally more significant in states like New York and California.
Do not let status quo bias prevent your family from capitalizing on these changes. We recommend scheduling a review by year-end 2025 to ensure your estate plan reflects the new permanent landscape. The families who act now—while others remain on the sidelines—will be best-positioned for the decades ahead.
Contact your Sunpointe advisor to discuss how OBBBA specifically impacts your family’s wealth transfer strategy.
