Key Estate Planning Implications Following Passage of the One Big Beautiful Bill Act

After months of speculation and uncertainty, President Trump has signed the One Big Beautiful Bill Act (OBBBA) passed by Congress. By locking in core elements of the 2017 Tax Cuts and Jobs Act (TCJA) and unveiling a series of significant additional reforms, the OBBBA both solidifies and reshapes the estate planning landscape for high-net-worth individuals. In the overview that follows, we distill the core estate, gift and generation-skipping transfer (GST) tax components of the OBBBA with a spotlight on what matters most for forward-looking planning strategies starting January 1, 2026.

Legislative “Permanence” and the Byrd Rule

One of the most consequential features of the OBBBA is its legislative “permanence.” The TCJA was enacted through budget reconciliation, making it subject to the Byrd Rule. This Senate rule restricts reconciliation bills to provisions with direct budgetary impact, often forcing tax cuts to expire after a set period. In contrast, the OBBBA was passed through regular order, allowing its provisions to remain in effect without automatic sunset unless so specified statutorily, meaning that its provisions, such as the $15 million unified exemption (more on this below), are not automatically set to expire. This structural difference provides a more stable foundation for long-term estate and gift tax planning, reducing the urgency that characterized planning under the TCJA.

Permanence in legislative terms, however, does not mean immunity from change. While most of the OBBBA’s provisions are not scheduled to sunset like the TCJA’s provisions, they remain politically vulnerable to future repeal or revision by future Congresses and subsequent legislative action.

As such, clients and planners alike should view the current environment as a strategic window. The law’s durability supports multi-year planning strategies like Grantor Retained Annuity Trusts (GRATs), Spousal Lifetime Access Trusts (SLATs) and dynasty trusts. However, the potential for shifts in the political winds suggests that front-loading planning may be prudent for clients with significant estate or state income tax exposure.

Lifetime Exemption:

As referenced above, under the OBBBA, the lifetime exemption for estate, gift and GST taxes is “permanently” set at $15 million per person ($30 million per couple), indexed for inflation. The 40% top rate is still here, but with a broader exemption; as a result, your planning options have expanded as well. With this expanded exemption “locked in,” now is an opportune time to consider planning strategies such as GRATs, SLATs and sales to intentionally defective grantor trusts (IDGTs).

Annual Exclusion Amount:

The annual gift tax exclusion remains and continues to offer increased flexibility for lifetime gifting strategies. The Internal Revenue Service (IRS) has increased the exclusion to $19,000 per recipient for 2025, making it even easier to spread the wealth without eating into your valuable lifetime exemption.

Portability & GST:

The OBBBA preserves the portability of the estate and gift tax exemption between spouses, enabling married couples to fully utilize the combined $30 million exemption without forfeiting any unused portion at the first death. This simplifies planning for many families and, in some cases, reduces the need for traditional credit shelter trusts. In contrast, the GST exemption, though equal in value, is not portable. For clients focused on legacy planning across multiple generations, this distinction creates a strategic imperative—to ensure the GST exemption is properly allocated during life or at death to maximize tax efficiency and preserve wealth for future generations.

State and Local Tax Deduction & Trust “Stacking” Planning Opportunity:

While framed as an income tax provision, the OBBBA’s expanded state and local tax (SALT) deduction cap opens the door to advanced estate planning strategies, most notably by enabling the use of multiple nongrantor trusts to maximize deductible SALT payments, as described further below.

The SALT deduction cap receives a meaningful, albeit temporary, expansion beginning in 2026. The cap increases to $40,000 for married couples filing jointly ($20,000 for separate filers), up from the current $10,000 limit. While this change potentially offers welcome relief for taxpayers in high-tax jurisdictions such as California, the benefit is subject to income-based phaseouts, including:

• It begins to phase out at $500,000 of modified adjusted gross income (AGI); and
• It is fully eliminated at $600,000.

Although the OBBBA was enacted through regular legislative order and is not subject to the Byrd Rule, certain provisions, such as the expanded SALT deduction cap, are scheduled to sunset under the statute itself. Notably, the cap will increase by 1% annually through 2029 before statutorily reverting to $10,000 in 2030.

Until the scheduled reversion in 2030, the expanded SALT deduction cap creates a valuable window for implementing trust “stacking” strategies using multiple nongrantor trusts. The trust “stacking” strategy leverages the fact that nongrantor trusts are treated as separate taxpayers under the Internal Revenue Code and the fact that each trust:

• Files its own Form 1041;
• Is eligible for its own $40,000 SALT deduction; and
• Can pay its own SALTs, including property and income taxes. 

By creating multiple nongrantor trusts, high-net-worth individuals can effectively “stack” multiple $40,000 deductions and potentially shelter hundreds of thousands of dollars in SALT payments that would otherwise be nondeductible on a personal return.

It is important to note that the IRS has historically scrutinized aggressive trust stacking arrangements under both the Substance-Over-Form and Step Transaction doctrines. Thoughtful structuring and documentation are key to mitigating audit risk.

Charitable Giving:

Charitable giving remains a cornerstone of the tax code, but the OBBBA introduces new limitations that should affect planning strategies. The 60% of AGI limit for cash contributions to qualified charities is now “permanently” codified, preserving a favorable ceiling for large gifts. However, a new 0.5% AGI floor has been implemented, meaning only the portion of charitable contributions that exceeds 0.5% of AGI is deductible.

This change may encourage the use of “bunching” strategies, consolidating multiple years of giving into a single tax year, to maximize deductibility. Donor-advised funds may be particularly effective in helping donors meet the new threshold while maintaining flexibility in grantmaking.

Private Foundations:

Private foundations remain largely unaffected by the OBBBA from a structural standpoint. The 1.39% net investment income (NII) excise tax applicable to private foundations is unchanged, and no new compliance burdens were introduced for these entities. This continuity provides welcome stability for donors who use private foundations as part of their long-term philanthropic and estate planning strategies.

With the broader estate and gift tax exemption now locked in, high-net-worth individuals may find renewed incentives to fund or expand private foundations as vehicles for legacy giving and multigenerational charitable engagement. The OBBBA’s preservation of favorable treatment for private foundations reinforces their continued utility in sophisticated wealth transfer plans.

Conclusion & Strategic Takeaways

The OBBBA opens a timely window for strategic estate and gift tax planning, especially for high-net-worth individuals in high-tax states. With the $15 million exemption now “permanent”, clients can move beyond reactive gifting and more comfortably adopt long-term strategies like GRATs, SLATs and dynasty trusts.

Although these provisions are not subject to automatic expiration under the Byrd Rule, they remain politically exposed. Acting in 2025–2026 may allow clients to secure key benefits while the current legislative environment remains favorable.

Given the scope and timing of these changes, now is the time to revisit existing plans and explore new structures that align with the OBBBA’s expanded planning landscape.

We encourage clients to schedule a review with our team to assess how these changes affect their unique estate, income, and philanthropic planning. Manatt’s interdisciplinary team is ready to help you navigate this evolving landscape with confidence.

Estate Planning Impact of the OBBBA – Summary