Beginning January 2026, the One Big Beautiful Bill Act (OBBBA) brings forth a new era for estate planning.
Estate and Gift Tax Exemptions
On January 1, 2026, the federal estate, gift, and generation-skipping transfer tax exemptions will be raised to $15 million per individual and $30 million per married couple. The federal estate and gift tax rate will remain at 40%. The annual gift tax exclusion rises to $19,000 per recipient.
This opens the door to generating trust fund strategies and substantial lifetime gifting. Families may consider using the annual gift tax exclusion to fund irrevocable trusts. This locks in the current favorable tax treatment but also provides room for flexibility with inevitable tax law changes with future administrations.
Next Generation Estate Planning
There are new estate planning opportunities through the OBBBA that will benefit taxpayers with children, grandchildren, and other young beneficiaries.
Expanded Use of Section 529 Plans // College Saving Plans
Through the OBBBA, there is an expanded use of tax-exempt distributions. This means that the 529 funds can be used for educational expenses related to enrollment or attendance. For example, some of these eligible expenses include: tuition, books, tutoring, standardized test fees, and more. The K-12 expenses annual withdrawal limit will double from $10,000 to $20,000 in 2026. The 529 funds can now be used for training, licensing exams, and credentialing programs. The CPA exam, bar exam, and CDL fit within these guidelines.
These new changes allow for a broader range of career and educational pathways. The 529 plans are now more versatile and earn interest tax-free.
Trump Accounts
Every U.S. citizen born between 2025 and 2028 is eligible to create a tax advantaged account and receive a one-time government contribution of $1,000. The “Trump Account” works similarly to a Roth IRA account as both have limited annual tax-free contribution amounts and allow limited taxable withdrawals. At the age of 18, withdrawals are allowed for “qualified expenses” such as small business expenses, higher education, or first-time home purchases. The annual maximum contribution is $5,000 per child. Employers are able to contribute up to $2,500 per year.
What to do now?
Now is the time to revisit your estate plan. These 2026 changes offer enhanced flexibility in education planning, new savings vehicles, and most importantly, expand exemptions. The One Big Beautiful Bill Act creates an opportunity for family planning and a favorable playing field for wealth transferring.
For additional information about the One Big Beautiful Bill Act, contact us today!