A few days ago, Congress agreed to send a bill to the Senate known as the One Big Beautiful Bill Act. The question is, does this Act repeal the Estate Tax? In short – No, it doesn’t (see: Kiplinger’s and other online sources). It does however increase the federal estate tax exemption from $13.99M to $15M per person. Remember, this is NOT YET LAW. The Senate needs to agree to the bill and the President needs to sign off.
Other Major Changes Related to Estate Planning
Although the One Big Beautiful Act Bill does not repeal the estate tax, it appears that the law would:
- Make the federal estate tax exemption permanent; and
- Index the estate tax exemption beginning in 2026 (See: https://taxfoundation.org/research/all/federal/big-beautiful-bill-house-gop-tax-plan/)
Making the amount of the federal estate tax exemption permanent is actually a big deal. It has been a constant source of problems for estate planning attorneys and anyone else who wishes to plan long term. It is very hard to plan if you don’t know if the estate tax exemption will increase, decrease, or if they will repeal the estate tax permanently. Having certainty will definitely allow for a bit more simplicity when planning.
Other Major Potential Changes You May be Interested In
There are other potential tax changes that some of you may be interested in, particularly:
- They may increase the SALT deduction cap from $10,000 (although I have seen a variety of articles which indicate the new cap could be either $30K or $40K with a phaseout depending upon your income level);
- Temporarily increase the standard deduction for seniors; and
- Make the Section 199A pass-through deduction permanent while increasing the deduction percentage from 20 percent to 23 percent.
How Do the Proposed Changes Affect You?
Assuming the One Big Beautiful Act is signed into law, then here is how it could affect many of you:
- For those of you who live in a state that has high property taxes, it may be easier to stay in your home rather than needed to relocate to a jurisdiction with a lower property tax since you can now take a higher federal income tax deduction against those property taxes;
- You may have created an irrevocable trust to fund in the event that the estate tax exemption sunset down to about $7M per person (or you may have one that you created a long time ago). Accordingly, you may wish to be at a higher level of net worth before it is actually worthwhile to create and fund an irrevocable trust.
- Many people have been holding off on creating or revising their estate plan as they where seeing if Congress would repeal the estate tax. Accordingly, the wait may soon be over.
- You may be able to simplify your estate plan.
- Many people will hold off on gifting funds downstream to their descendants, instead choosing to maintain those assets so that they can get a step up in basis upon death.
Summary
In summary, the proposed law does not repeal the estate tax, but it does set the federal estate tax exemption amount at $15M, indexed for inflation. If you have any questions regarding the proposed law or how it may affect your estate plan, the attorneys at The Pollock Firm LLC can assist.
