Navigating Estate and Inheritance Planning in a New Tax Era
Why This Matters Now
With the passage of the One Big Beautiful Bill Act (OBBBA), the estate planning landscape has fundamentally shifted. Previously, the lifetime estate and gift tax exemption was scheduled to drop from its inflation-adjusted 2025 level of $13.99 million to around $7 million per person starting in 2026.
However, the OBBBA replaced this reversion with a new permanent exemption of $15 million per individual, or $30 million per married couple, effective January 1, 2026. The exemption will also be indexed for inflation going forward.
While this dramatically expands the potential for tax-free wealth transfer, it doesn’t eliminate the need for proactive planning. State-level taxes, rising asset values, and changing family dynamics still require thoughtful strategies to preserve your legacy.
Federal vs. State: Key Distinctions in Estate and Inheritance Taxation
Estate Tax
- Levied on the total value of a decedent’s estate before assets are distributed.
- Paid by the estate.
Inheritance Tax
- Imposed on beneficiaries based on the amount received and their relationship to the decedent.
- Collected by certain states only.
Where You Live Still Matters
The federal exemption may be generous, but many states impose their own estate or inheritance taxes — often with much lower thresholds.
| State | Tax Type | Notes |
| CT, HI, IL, MA, ME, MN, NY, OR, RI, VT, WA, DC | Estate Tax | State-level exemptions range from ~$1M to ~$9M; top rates up to 20% |
| MD | Estate & Inheritance Tax | Only state with both taxes; inheritance tax can reach 10% |
| NE, KY, PA, NJ | Inheritance Tax | Rates vary by relationship (0%–18%) |
| FL, TX, AZ, VA, WI, CO, etc. | None | No state-level estate or inheritance tax |
Even with favorable federal changes, your estate could still face significant taxes depending on where you reside or own property.
Six Strategies for High‑Net‑Worth Families to Preserve Wealth
- Annual Gifting
The 2025 annual exclusion allows individuals to gift up to $19,000 per recipient ($38,000 for couples) without tapping into the lifetime exemption. This remains a simple and effective way to reduce your taxable estate.
- Use the Lifetime Exemption Strategically
With a new exemption floor of $15 million (per person), there’s now more flexibility in how and when to transfer assets. Whether you act before or after 2026, utilizing the exemption through outright gifts or trust transfers remains essential to long-term planning.
- Establish Advanced Trusts
- Spousal Lifetime Access Trust (SLAT): Allows you to remove assets from your estate while providing access to your spouse.
- Dynasty Trust: Passes wealth across generations without triggering additional estate taxes.
- Grantor Retained Annuity Trust (GRAT): Transfers appreciating assets to heirs with minimal gift tax impact.
Each of these tools can help control timing, tax exposure, and multigenerational wealth transfers.
- Use Irrevocable Life Insurance Trusts (ILITs)
Life insurance owned inside an ILIT avoids estate tax and provides liquidity to cover tax liabilities or equalize distributions. This remains a cornerstone strategy for many estate plans.
- Charitable Planning
Options like Charitable Remainder Trusts (CRTs) and Donor-Advised Funds (DAFs) allow you to reduce your taxable estate while supporting the causes you care about. The OBBBA also enhances deduction opportunities for charitable giving in certain cases.
- Review Your Residency
Relocating to a state with no estate or inheritance tax can materially improve your estate’s after-tax outcome — but such moves must be genuine and well-documented. Changes in domicile, primary residence, and asset ownership all require legal precision.
Final Takeaway
The One Big Beautiful Bill Act has transformed the federal estate tax environment — offering more room to transfer wealth without federal taxation. But this shouldn’t lead to complacency. If your estate exceeds $15 million individually or $30 million as a couple, proper planning remains essential.
State taxes, family goals, liquidity needs, and evolving laws all demand a coordinated strategy. At 44 North Capital, we partner with you and your legal and tax advisors to design plans that reflect your values, your goals, and your legacy.
Now is the right time to assess whether your current estate plan takes full advantage of the new law — and whether it’s built for what comes next.
Sources
- IRS – Estate and Gift Tax Limits
- U.S. Congress – One Big Beautiful Bill Act Summary (2025)
- Tax Foundation – Federal and State Death Tax Overviews
- Kiplinger – 2025–2026 Estate Tax Planning Guides