What the New $15 Million Estate and Gift Tax Exemption Means for Estate Planning (2025 Update)
- Brian Qualls
- Jul 21
- 3 min read
On July 4, 2025, President Trump signed a major tax reform into law—Section 70106 of H.R. 1 as part of the “One Big Beautiful Bill” that creates a “permanent” $15 million federal estate and gift tax exemption, effective for gifts made and estates of decedents dying after December 31, 2025. This exemption will be adjusted for inflation moving forward.
So, what’s the impact of this change on estate planning strategy? Let’s break it down.
Understanding the New Federal Estate and Gift Tax Exemption
While the increase in the federal exemption may seem incremental, the elimination of the sunset clause is a potential game-changer. Under prior law, exemption levels were scheduled to automatically revert (sunset) to lower amounts without legislative action. Now however, future reductions in the estate and gift tax exemption would require that a new administration/party in control to affirmatively propose that federal estate and gift taxes should be increased, requiring a direct (and likely unpopular) vote in Congress.
This political shift has important implications for high-net-worth families, business owners, and farmers looking to preserve wealth across generations.
How Permanent Is “Permanent”?
The term permanent is somewhat misleading. The exemption could still be changed by future administrations, particularly starting in 2029. However, after over a decade of high exemption levels (dating back to the 2017 Tax Cuts and Jobs Act), a sudden reduction could be viewed as disruptive and unpopular move, particularly among established business families who have structured their long-term plans around a higher exemption —making it less likely that a dramatic cut will occur.
Estate Planning Implications: Should You Make Large Lifetime Gifts?
Example: Weighing Estate Tax Savings vs. Capital Gains Taxes
Let’s consider a scenario discussed in this article from WealthManagement.com to assess the real-world impact of lifetime gifts:
In 2026, a person gifts $15 million in appreciated assets with a $5 million tax basis.
By 2030, the value increases to $20 million, and the exemption drops to $12 million.
Estate tax savings:
$1.2 million from grandfathering the extra $3 million exemption
$2 million from appreciation sheltered from estate tax
Total: $3.2 million saved
However, the carryover basis on the gifted assets triggers capital gains taxes of $2.82M–$3.57M upon sale or liquidation by heirs. In this case, the net tax savings could be minimal—possibly break-even or worse, depending on future tax rates.
This illustrates that large lifetime gifts might not always be the most tax-efficient estate planning strategy under the new law.
Striking the Right Balance
Ultimately, post-2025 estate planning has become a balancing act.
Planners must weigh the potential estate tax savings from locking in the higher exemption through lifetime gifts against the loss of a step-up in income tax basis, which could trigger significant capital gains taxes for heirs.
While the temptation to act quickly before potential political changes is strong, the longer the current high exemption remains in place, the less likely it is that a future administration will drastically reduce it.
This doesn’t mean large gifts won’t make sense anymore—but it does mean they shouldn’t be automatic. Each decision should be carefully analyzed based on the client’s unique financial situation, estate size, asset composition, and long-term goals.
Rather than defaulting to aggressive gifting strategies, estate planners should conduct each decision should be carefully analyzed based on the client’s unique financial situation, estate size, asset composition, and long-term goals.
Conclusion: Estate Planning in 2026 and Beyond
The new “permanent” $15 million federal estate and gift tax exemption offers more than a higher threshold—it marks a strategic shift in estate tax planning. The lack of a built-in sunset clause adds a layer of long-term stability, but also demands a more nuanced, tax-efficient approach to lifetime giving and wealth transfer.