Big Beautiful Tax Reform: What You Need to Know About the Big Beautiful Bill Tax Act

By Barry A. Nelson, Jennifer E. Okcular, and Cassandra S. Nelson

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act aka the Big Beautiful Tax Bill (the “Bill”), a sweeping reform package that marks the most significant changes to the U.S. tax code in over a decade.

The Bill extends many of the provisions in the 2017 Tax Cuts and Jobs Act (“TCJA”) and adds additional income tax and business tax provisions. The Bill eliminates the previously anticipated January 1, 2026 sunset of the TCJA estate and generation skipping transfer tax exemption (the “Exemption”) increase (which, prior to the Bill, was scheduled to decrease from the current $13.99 Million (or a total of $27.98 Million per couple if married) to approximately $7 Million or if married approximately $14 Million in total per couple). The Bill sets the Exemption at $15 Million (or a total of $30 Million per couple if married) beginning January 1, 2026, and the Exemption increases annually beginning in 2027 by a cost-of-living factor. In addition, the Bill maintains the current 40% rate of tax for any assets in a gross estate that exceed the Exemption. As a result, clients are not pressured to make full use of their estate and gift tax Exemption before the end of this year or lose about one half of its benefit as would have been the case without the Bill.

Nevertheless there are still great planning benefits of making use of the Exemption (to the extent clients have not already made use of the Exemption) to proceed with estate planning and wealth transfers to take advantage of freezing the values of gifted assets, and asset protection benefits of irrevocable trust planning especially where there is a possibility that a family investment could substantially appreciate in the near future or to take advantage of discounts for lack of marketability or minority interests in businesses or real estate.  Among some of the techniques our clients have used for these gift opportunities are Spousal Limited Access Trusts (“SLATs”) or irrevocable dynasty trusts for children (“Dynasty Trust”). For those clients who have initiated such planning earlier in their lives, many have seen significant appreciation in the gifted assets that are held in asset protection irrevocable trusts and will avoid estate and generation skipping transfer taxes on such assets for generations. The asset protection allows the trusts to be held for the family designated beneficiaries and are generally effective against judgements and marital claims.

Below is a summary of some of the other Bill provisions that our clients may be most interested in.  This update is not intended to be a comprehensive summary of the Bill.

Estate Tax Provisions

• Lifetime Exemption Increased: As noted above, the gift, estate tax and generation skipping transfer tax Exemption  will increase to $15 Million (or $30M in total per couple if married), effective January 1, 2026, indexed for inflation annually. This provision does not have a sunset date, making the changes permanent unless future legislation is passed.  Accordingly,  in 2026, married couples can pass a total of $30 Million in assets upon death or by gift without having to pay gift or estate tax if they did not previously use any portion of the Exemption. Note: Despite the increase in the Exemption amounts, it is still critical that clients consider filing portability estate tax returns upon the death of the first spouse to benefit from the unused Estate tax and Gift tax Exemptions of the first spouse to die. 
• Rate Continued: The Bill also maintained the rate of tax for estates over the Exemption amount at a flat 40%. Accordingly, if an unmarried individual dies with a taxable estate in excess of $15 Million if 2026 or a couple (assuming a portability return was filed upon the death of the first spouse) dies with a taxable estate in excess of $30 Million in 2026, any excess will be subject to estate tax at 40%. Note the actual Exemptions available will be reduced  by prior used Exemption.
• Step Up in Basis Maintained: The Bill did not eliminate “step up” in income tax basis.  Thus, assets owned by a decedent at death will receive a step up in income tax basis to date of death fair market values. As a result, recipients of such assets will have no capital gains tax on pre-death appreciation. If the assets inherited are sold shortly after death for fair market value, capital gains tax will likely be minimal. Note: The elimination of step up in income tax basis has frequently been discussed by legislators. It must be noted that assets owned in a SLAT or other Irrevocable Trust created by a settlor that are not included in a decedent’s estate do not benefit from a step up in income tax basis upon the decedent’s death.  As a result, such trusts should be monitored and there may be ways to plan to swap high basis assets for low basis trust assets based upon the terms of the trust with careful planning before the death of the settlor.
• Planning Implications: The Bill allows for the continuation of current planning strategies and does not require immediate action before year end as previously feared to take advantage of the TCJA Exemption amounts. Nonetheless, clients who have not already utilized their lifetime exemptions (as adjusted for inflation annually) should consider gifting strategies to lock in the exemption amount and “freeze” the value of the assets passing to their intended beneficiaries so that the appreciation on such gifted assets pass tax free. This can be done through the following strategies:
• • Gifts via Irrevocable Trusts for Those Over $15 Million or $30 Million Per Married Couple: As previously mentioned, married clients should consider SLATs, which is an irrevocable trust created by one spouse for the other spouse that utilizes the gifting spouse’s lifetime exemption and freezes the value of the assets passing to the SLAT. In addition, clients should consider Dynasty Trusts, which are irrevocable trusts created for children and/or grandchildren and are intended to exist for generations. Assets that have growth potential should be considered for such gifts as the appreciation will pass tax free to the beneficiaries and outside of the settlor’s estate. However, irrevocable trust planning should be weighed against the loss of the “step up” in basis at death. Nonetheless, the irrevocable trusts our firm creates for our clients provides the settlor with a “substitution power” which is a technique that can be utilized to swap assets within the trust for assets of equivalent value held by the settlor so that the settlor passes away with assets that have significant appreciated in value and benefit from the step up in income tax basis.

• • Annual Exclusion Gifting: Clients above the estate and gift tax exemption amount should consider annual exclusion gifts to family members, which is currently at $19,000 per person or $38,000 if a split-gift election is made among spouses (or if both spouses each make a gift to the beneficiary). This amount is increased for inflation and generally increases by $1,000 each year.

• • 529 Plan Account Changes: Clients above the estate and gift tax exemption amount should consider funding 529 plans for their children and/or grandchildren. Clients can contribute 5-years’ worth of contributions in one year, provided they file a gift tax return reflecting such, but then must delay until the sixth year to make an additional tax free 529 gift.  Those who take advantage of the 5 year advance gift can make a 5 year prepayment gift of $95,000 to a 529 plan in 2025 for a child or grandchild if no other gifts were made in the current year, which will count as gifts over the next 5 years of $19,000.  If spouses contribute as well to a child or grandchild’s 529 plan in 2025 and have not made prior gifts to such child or grandchild during the year (and have not made an advance 529 payment in the past that is deemed to be a taxable gift in the current year), then the total amount both spouses can gift to such 529 account for each child or grandchildren free of gift tax is $190,000.  Further there are ways to use 529 accounts for asset protection for both the beneficiary and the owner of the 529 account.  The Bill revised the definition of qualified higher education expenses with respect to 529 accounts, now allowing 529 accounts to be used for an expanded range of K-12 expenses, including books and other curriculum materials, some testing fees, and some educational therapies for students with disabilities. In addition, the tax-free withdrawal limit for K-12 expenses increased from $10,000 to $20,000 per year. It is also important to note that effective January 1, 2024, under certain conditions, unused 529 plan funds can be rolled into the beneficiary’s Roth IRA without a tax penalty, subject to several limitations, such as, but not limited to, a lifetime limit of $35,000 and the requirement that the 529 plan must have been maintained for the beneficiary for at least 15 years.
• • Charitable Planning: For clients with charitable interests, our office can recommend and help implement charitable giving strategies based upon our client’s objectives. Our firm has worked with numerous clients over the years to custom-tailor donor-advised funds, private foundation trusts, charitable remainder trusts, charitable lead trust, etc. explaining the benefits and drawbacks of each approach, so that our clients can make the most informed decision on the technique that best satisfies the client’s desires. Charitable planning can also be a key component for reducing a client’s taxable estate, if such client is charitably motivated.

• • Review existing life insurance and retirement plan beneficiary designations: Clients should review their current life insurance policies, including the primary and contingent beneficiaries thereof, to make sure such adequately satisfies their objectives and to determine whether modifications should be made to such policies. In addition, clients should review their retirement plan beneficiaries (both primary and contingent) to ensure they meet their current objectives. For beneficiaries designating more than one individual as primary or contingent beneficiaries, clients should reach out to their administrator to determine how such assets pass in the event the named individual predeceases the account owner or insured. Clients with charitable intentions should consider gifts of their retirement plan assets to charity as part of their planning due to the fact that non-Roth retirement plan assets are subject to income tax and estate tax. Clients with children or grandchildren with disabilities may find that a gift of retirement assets to a special needs trust for such beneficiary is a great way to expand the duration of the required retirement plan distributions that currently is 10 years or less unless the beneficiary is a spouse or a disabled beneficiary.

We encourage our clients to schedule an “estate planning checkup” every three to five years or sooner, if personal or financial circumstances materially change. While we address matters we believe are of interest to many, there are an infinite number of year-end planning options that are not discussed in this letter.

Disclaimer: This information has been prepared for educational purposes only and is not offered, nor should be construed, as legal advice. Use of this information without careful analysis and review by your attorney, CPA, and/or financial advisor may cause serious adverse consequences. We provide absolutely no warranty or representation of any kind, whether express or implied, concerning the appropriateness or legal sufficiency of this information as to any individual’s tax and related planning.