Authored by: Brian Sak, CFP®, CLU®, ChFC®
Historic Expansion (and contraction) of Exemptions
One of the most impactful provisions within the One Big Beautiful Bill Act (OBBBA) is the permanent increase in the federal estate, gift, and generation-skipping transfer (GST) tax exemptions. While the term “permanent” suggests long-term certainty, history tells a different story. Over the past several decades, these exemption levels have been changed repeatedly—sometimes increased, sometimes reduced—often under the label of permanence, only to be revised with shifting political priorities. This latest change builds on the historically high limits introduced under the 2017 Tax Cuts and Jobs Act, but significantly enhances them, offering high-net-worth families a powerful planning opportunity. As of 2025, the estate and gift tax exemption is $13,990,000 per individual. Under the OBBBA, it will rise to $15,000,000 per individual—effectively $30,000,000 for married couples—beginning January 1, 2026. The exemption will be indexed for inflation moving forward, and the tax rate remains at 40%. The GST exemption will increase in tandem. Despite its “permanent” designation, this provision—like many before it—should be viewed as a window of opportunity, not a guarantee.
A Window of Opportunity, Not a Reason to Wait
On the surface, this legislative change introduces the appearance of long-term certainty. However, in practice, “permanent” tax law is only as durable as the political environment that sustains it. A future change in Congressional leadership or presidential administration could swiftly introduce new legislation aimed at reducing these exemption levels or increasing the tax rate. For affluent families, this means the current environment should not be viewed as an invitation to delay action, but rather as a rare and time-sensitive opportunity to implement high-impact planning strategies while the law remains favorable.
The increase to a $15 million individual exemption opens the door for larger and more deliberate transfers of wealth. This is particularly meaningful for individuals who have already exhausted most, or all, of their previous lifetime exclusion. Beginning in 2026, those individuals will effectively regain additional exemption capacity—creating an important second chance to transfer appreciating assets, reduce taxable estates, and further advance legacy goals without triggering gift tax liability.
Leveraging Advanced Trust Structures
The expanded exemptions under the OBBBA highlight a timely but often uncomfortable decision for affluent families: how to reduce estate tax exposure without giving up control or access to meaningful assets. Many hesitate to make large gifts for fear of losing flexibility. When structured properly by a team of professionals, strategies like Spousal Lifetime Access Trusts (SLATs), Grantor Retained Annuity Trusts (GRATs), and Dynasty Trusts can help solve this problem - allowing families to remove appreciating assets from the estate while indirectly retaining some practical benefits. These tools often align with both the expanded tax advantages of the OBBBA and long-term legacy goals of the family.
Rebalancing Trusts with Asset Location Strategies
The larger exemption also enhances the strategic opportunity to optimize asset location—not just allocation—within a client’s estate plan. With more room under the exemption, families can consider rebalancing which assets are held in irrevocable trusts versus in the taxable estate, particularly with an eye toward basis planning. In some cases, it may be advantageous to substitute high-basis assets into a trust while pulling low-basis assets back into the estate to take advantage of the step-up in cost basis at death. This thoughtful placement of assets can mitigate capital gains tax exposure for heirs while still honoring the long-term intent of the estate plan. As exemption thresholds rise, these asset substitution strategies become more flexible and impactful, allowing for both tax efficiency and improved legacy outcomes.
Insurance Planning: More Than Just Liquidity
Affluent families often face a unique and pressing challenge: how to provide sufficient liquidity at death to pay estate taxes, equalize inheritances, and preserve legacy assets such as businesses, real estate, or investment holdings. These obligations can create significant strain on an estate, particularly when most of the family’s net worth is tied up in illiquid assets. Life insurance continues to be one of the most effective tools to address this problem—providing tax-efficient liquidity exactly when it’s needed most. As exemption levels increase under the OBBBA, it becomes critical to reevaluate how insurance fits into the broader estate plan. This includes reassessing ownership structures, funding strategies, and the use of irrevocable life insurance trusts (ILITs) to ensure that policy proceeds remain outside the taxable estate and aligned with long-term family objectives.
Split-Dollar and Note Forgiveness Opportunities
One important area of focus is private split-dollar arrangements—structures in which a high-net-worth individual funds insurance premiums on behalf of an ILIT, often through a loan or economic benefit regime under Treasury Regulations §1.61-22. These arrangements are particularly valuable for leveraging gift tax efficiency while retaining estate exclusion. With the expanded gift and estate tax exemption under the OBBBA, families now have the flexibility to unwind or restructure older split-dollar agreements by forgiving outstanding receivables or terminating note-based funding arrangements, thereby removing encumbered assets from the estate and simplifying future administration.
Additionally, the higher exemption creates a meaningful opportunity to forgive large intra-family notes, including those related to split-dollar receivables or legacy installment sales to intentionally defective grantor trusts (IDGTs). Under current tax law, the forgiveness of such notes constitutes a taxable gift under IRC §2512, but with expanded exemption headroom, these transactions can be executed with minimal or no immediate tax liability. Forgiveness not only reduces potential estate inclusion under IRC §2033 and §2036 but also clears the balance sheet for simpler, more flexible future planning.
Front-Loading ILITs for Efficiency
Moreover, families can now consider front-loading ILITs with lump-sum contributions to fund long-term premium obligations. This avoids the ongoing need for annual exclusion gifts and Crummey notices, which can become administratively burdensome and legally tenuous over time. By allocating a portion of the expanded exemption to pre-fund ILITs, clients may lock in future premium capacity today while ensuring policies remain outside the taxable estate and proceeds are available to provide liquidity, equalization, or to support philanthropic goals.
Coordinate with Certified, Competent Professionals
As with any advanced planning, these strategies require careful coordination among tax, legal, and financial advisors, and nothing in this article should be considered investment or legal advice. But with the right structure in place, families can use the current exemption to enhance not only tax efficiency but also the durability and effectiveness of their overall estate plan.
Finally, it is essential to account for state-level estate taxes, which remain separate from federal rules. Families residing in states with their own estate tax regimes must coordinate planning to address both layers of potential liability.
Planning with Purpose—While the Window Is Open
The OBBBA offers a rare planning opportunity—but history shows that so-called “permanent” tax laws often change. At Granite Harbor, we believe wealth planning must be both responsive to today’s law and prepared for tomorrow’s uncertainty. Now is the time for successful families to reassess their estate plans, not only to potentially leverage the expanded exemptions, but to ensure their strategy reflects the complexity of their wealth and long-term goals. Contact us today to evaluate your current plan and take thoughtful steps to protect your legacy while these favorable conditions remain.
Proactive, timely planning remains the cornerstone of successful wealth transfer. The current law presents a compelling case for action—not someday, but now.