This has been an interesting year for estate planning. What began as a year of uncertainty resolved itself on July 4, 2025 with the enactment of the One Big Beautiful Bill Act (OBBBA). This new law made permanent increases to the federal estate, gift and generation-skipping transfer tax exemptions, providing rare clarity in a field often marked by shifting rules. Now, as summer ends and clients focus on their year-end "To Do" lists, many are asking the same question: "With the exemption so high, do I still need an estate plan?"
While federal exemptions may look more generous, the importance of, and reasons for, estate planning remain the same. In fact, given the new legislation, this may be one of the most important and strategic times for clients to focus on their estate planning for several reasons:
Increased Exemptions are Permanent (Maybe)
Currently, the federal estate, gift and generation-skipping transfer tax exemption is $13.99 million per person ($27.98 million per married couple). OBBBA increases these exemptions to $15 million per person ($30 million per married couple), beginning January 1, 2026. The exemption is indexed for inflation, so it is expected to increase in 2027 and each year thereafter. Unlike the 2017 changes which were scheduled to sunset at the end of this year, the increased exemption is "permanent" and is not scheduled to end.
However, "permanent" is a relative term. Given political uncertainties, rising federal debt and the likelihood of tax priorities shifting with each new administration, there is no guarantee that the increased exemptions will not be reduced in the future.
Thus, clients should act to utilize their increased exemptions today, rather than risking future changes to the law. Furthermore, estate plans can be structured so that clients can easily "top-off" their exemptions each year to utilize future increases due to inflation.
Growth and Appreciation are Key
One of the most powerful tools in estate planning isn't a complicated trust structure or obscure tax loophole – it's time. Today's transfers don't just utilize one's available exemptions; rather, they ensure that tomorrow's growth is not subject to transfer taxes.
For example, $15 million today appreciating at 10% will be worth almost $40 million in 10 years. A client who utilizes his $15 million gift tax exemption will have a substantially lower estate tax liability than one who waits for the assets to be worth $40 million before planning.
Planning now allows families to shift appreciating assets, such as business interests, real estate or marketable securities, into trusts or other planning vehicles that exclude future growth from estate tax exposure.
State Estate Taxes Still Apply
Given the high 40% federal transfer tax rates and the high federal transfer tax exemption, many clients overlook the impact of state transfer taxes. However, for those clients living or owning property in a state with an estate tax (such as New York, Maryland, Washington, DC and Illinois), state level estate taxes can be significant. For example, in New York, a married couple that dies in 2026 with assets valued just under $30 million will not owe federal estate taxes, but will owe almost $4.3 million in New York estate taxes.
Most states with an estate tax do not impose a transfer tax on lifetime gifts. This allows clients to make lifetime gifts that reduce their estates but preserve the state level exemption that will be available at death.
Thus, clients should continue to utilize estate planning strategies to help reduce, or potentially eliminate, any state level estate taxes.
Estate Planning in High Interest Rate and Unpredictable Environments
Although federal transfer tax exemptions may now be predictable, other financial changes, such as changing interest rates, remain uncertain. Given pressures by the current administration to reduce interest rates, clients should strongly consider utilizing "high interest rate" planning strategies, such as the use of Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Trusts (CRTs). If interest rates drop – as expected – these opportunities may be less effective.
Building Flexible Estate Planning Strategies for the Future
Estate planning should not mean locking yourself into an irreversible estate plan. Rather, it should consist of a planning infrastructure that is flexible enough to address both anticipated and unanticipated future events. Clients with an estate planning framework in place will be able to take advantage of favorable opportunities, especially those that are time-sensitive. For example, sudden valuation changes and unexpected liquidity events can give rise to opportunities, especially if one is using grantor trusts that allow clients to swap personal assets with trust assets. Furthermore, by using Spousal Lifetime Access Trusts (SLATs), a client's spouse can retain the benefits of gifted property in case of unanticipated financial needs.
Although increased federal transfer tax exemptions may reduce the number of families subject to federal estate tax, they do not eliminate the need for thoughtful, strategic and flexible estate planning. If anything, they provide an even greater incentive for clients to engage in estate planning or revisit their current plans.
To discuss specific estate planning options for you or your family, please feel free to reach out to your private client counsel at Venable.