In a significant development for estate planning, the One Big Beautiful Bill Act has made the elevated federal estate tax exemption permanent. This change fundamentally alters the landscape for wealth transfer planning.
What Changed
The Tax Cuts and Jobs Act of 2017 roughly doubled the federal estate tax exemption, but that increase was set to sunset at the end of 2025. Many families and their advisors spent years planning for the potential reduction. With the new legislation, the elevated exemption — now indexed for inflation — is permanent.
What This Means for Your Planning
For most American families, this is welcome news. With the exemption at approximately $13.6 million per individual (and $27.2 million per married couple), the vast majority of estates will not be subject to federal estate tax. However, this doesn't mean estate planning becomes irrelevant.
State Estate Taxes Still Matter
Several states maintain their own estate or inheritance taxes with much lower thresholds. Colorado does not currently have a state estate tax, but if you own property in other states, their rules may apply.
Planning Beyond Taxes
Even without estate tax concerns, proper planning ensures:
- Assets transfer efficiently to heirs without probate delays
- Your wishes are respected regarding healthcare decisions
- Business succession is handled smoothly
- Beneficiary designations are current and coordinated
- Trusts protect assets for future generations
Action Items
Even though the pressure of the sunset is removed, now is an excellent time to review your estate plan. Many people created or modified plans specifically in response to the potential sunset — those plans may now need adjustment to reflect the permanent landscape.
Have questions about how this change affects your estate plan? Schedule a meeting to review your situation.