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Benjamin Franklin once said, “In this world, nothing is certain except death and taxes.” Five years from when we first published this piece, the federal estate tax picture is more generous for families with the passage of the One Big Beautiful Bill Act (OBBBA) outlining tax changes for the next few years and some potentially longer.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, permanently setting the federal estate, gift, and generation-skipping transfer (GST) tax exemption at $15 million per individual ($30 million per married couple) beginning January 1, 2026, indexed for inflation. Additionally, the top estate transfer rate stays at 40% and the step-up in basis at death remains intact.

For many of the families we serve, that single change reshapes the estate planning conversation. The pre-OBBBA urgency to “use it or lose it” for gifting before the Tax Cuts and Jobs Act sunset potentially cut the exemption in half, is now gone. With the federal estate tax off the table for many, where does estate planning create the most value now?

The answer, increasingly, is income tax planning. Specifically, weighing the lifetime gift versus the step-up in basis at death, coordinating charitable strategies under new deduction rules, and using vehicles like 529 plans and trusts in ways that prioritize basis, control, and flexibility rather than pure exemption use. Below we revisit our original five strategies through that lens, with updated numbers and a few new elements worth knowing about.

2026 Quick Reference:

• Federal estate, gift and GST exemption: $15 million per individual / $30 million per married couple (permanent, inflation-indexed)
• Annual gift tax exclusion: $19,000 per recipient ($38,000 per married couple using gift splitting)
• Top federal estate, gift, and GST tax rate: 40%
• Step-up in basis at death: Preserved
• 529 superfunding (5-year election): up to $95,000 per individual / $190,000 per married couple
• New 0.5% AGI floor on itemized charitable deductions: Effective for tax years beginning after 12/31/2025

1) Annual Gifting, 529s and Forward Gifting

The What

Annual exclusion gifting remains one of the best estate planning tools available. For 2026, you can give up to $19,000 per recipient ($38,000 if married and gift-splitting) to as many people as you want without filing a gift tax return and without using any of your $15M lifetime exemption. The mechanics are unchanged from the original article, only the dollar amounts have changed.

What has changed is the framing. With the federal exemption now permanently at $15M per person, fewer families will exceed the limit, so annual gifting matters less as an estate-tax-reduction tool and more as a wealth transfer, education funding, and family engagement tool. For families safely under the federal threshold, the planning question flips from getting assets out of the estate, to keeping highly appreciated assets in the estate so heirs receive a step-up in basis at death.

On the flip side, for families with heirs in materially lower income tax brackets (0% or 15% long term capital gains bracket versus the donor’s 20% bracket), gifting highly appreciated assets during life, rather than holding them for a step-up can sometimes produce a better after-tax result when the heir sells. This is a strategy worth running by your CPA and advisor before acting.

The How

For families wanting to help with education, the 529 forward-gifting (“superfunding”) election remains powerful. In 2026, an individual can make a single lump-sum contribution of up to $95,000 per beneficiary ($190,000 for a married couple gift-splitting) and elect 5-year averaging on their tax form 709. Assuming no other gifts to that beneficiary during the 5-year period, this uses no lifetime exemption.

Two newer features worth noting:

• 529-to-Roth IRA rollover (SECURE 2.0)
  • Beginning in 2024, beneficiaries of 529 accounts that have been open for at least 15 years can roll over up to $35,000 (lifetime limit) of unused 529 funds into a Roth IRA in the beneficiary’s name (subject to annual Roth contribution limits and earned income requirements). This reduces the historical “what if my child doesn’t use it” objection to aggressive 529 funding. Alternatively, the beneficiary can be changed to someone else who is still in school.
• Expanded K-12 use
  • Beginning in 2026, 529 distributions can cover up to $20,000 per year per beneficiary for K-12 tuition at public, private, or religious schools, increased from the prior $10,000 limit.

For more information on superfunding mechanics, Fidelity’s 529 contribution limits for 2026 guide  and Saving For College 10 Rules for Superfunding a 529 Plan in 2026 walks through the math and Form 709 requirements.

2) Intra Family Loans

The What

Intra-Family loans are agreements between family members to access capital with benefits that may not be available in an institutional relationship.  Benefits primarily surround potentially lower interest rates than prevailing market rates, flexible repayment options, and potential to shift wealth between family members over time.  This could be an attractive option for borrowers who may not qualify for loans on their own, skip tedious applications, and quickly finance a project or purchase.   Interest rates on the loan must be set at or above the AFR (applicable federal rate) via the IRS website, which is updated monthly.

The key change since 2021 is the interest rate environment. AFRs are no longer at historic lows. They have moved meaningfully higher across short, medium, and long-term tiers. That doesn’t negate the strategy, but it does change the math. The spread between an intra-family loan rate and a comparable commercial loan rate is narrower than it was, and the relative attractiveness depends on what the borrower’s alternative looks like (mortgage, business loan, or credit line).

The How

A family member, usually a parent or grandparent, enters into an agreement with a future beneficiary or other family member to fund a purchase or project. A written contract must be drawn up between the parties to prove the legitimacy of a loan rather than a gift.  These must include both parties – lender and borrower, loan amount, interest rate, repayment schedule, maturity date and signatures.

While the lender transfers assets to another individual, the outstanding balance of the loan is still included in their estate and they must include interest received as income each year. Additionally, the lender may utilize the annual gift exclusion to forgive re-payment each year without filing a gift tax return. However, some attorneys recommend separating the annual gift exclusion instead of offering loan forgiveness to avoid scrutiny on the true intent of the loan.  Please check with your advisor or legal professional to ensure that the signed promissory note meets the IRS requirements for an intra-family loan.

Please reference the following link for additional information and examples on intra-family loans that may help your loved ones:

https://www.fidelity.com/learning-center/wealth-management-insights/consider-intrafamily-loans

3) Transferring Asset to Trusts

The What 

A revocable (living) trust continues to be a foundational estate planning tool for families seeking to avoid probate, maintain privacy, provide continuity during incapacity, and outline how assets should be managed and distributed at death. Because the trust remains revocable during the grantor’s lifetime, the assets are generally still considered part of the grantor’s taxable estate and the grantor continues to pay income taxes on trust assets.

In today’s environment, revocable trusts are also commonly designed with built-in flexibility to adapt to future estate tax law changes. Many trusts now incorporate provisions such as disclaimer planning, trust protectors, and flexible distribution standards to help families respond to changing tax exemptions and family circumstances over time.

The How

A revocable trust is established by a grantor who transfers ownership of assets — such as investment accounts, real estate, business interests, or bank accounts — into the name of the trust while typically continuing to serve as trustee during his or her lifetime. Upon incapacity or death, a successor trustee named within the trust document can step in to manage or distribute assets according to the trust instructions without the delays and public process often associated with probate administration.

While many clients have an active revocable trust, their next generation beneficiaries may not.    It’s important that as the next generation’s assets or families begin to grow that they start to review their estate plans and a revocable trust is often a key instrument in combination with a will, powers of attorney and healthcare directives. Please see our previous blog post for more information.

4) Irrevocable Trusts

The What

An irrevocable trust is commonly used to remove assets and future appreciation from a grantor’s taxable estate while also providing control over how and when beneficiaries receive assets.  The grantor creates the trust and designates another individual or corporation as an independent trustee. Unlike a revocable trust, an irrevocable trust generally cannot be modified or terminated without specific provisions, court approval, or beneficiary consent once it has been established and funded.  These vehicles are usually appropriate for high-net-worth families that don’t need the assets during their lifetime and do not plan to change the beneficiary designation(s) of the trust.  Another benefit is that these complex trusts also provide creditor protection for the grantor and beneficiaries.  However, by removing these assets from the estate, they do not receive a step up in cost basis at the passing of the grantor such as the way Revocable trusts do.’

The How

The planning process typically begins with an estate planning attorney working alongside the client’s CPA and financial advisor to evaluate projected estate growth, liquidity needs, cash flow requirements, and long-term family objectives. The attorney then drafts the trust structure based on the desired level of control, access, and multigenerational planning flexibility. Once the trust is established, assets may be gifted or sold into the trust utilizing annual exclusion gifting, lifetime exemption amounts, valuation discounts, or installment sale techniques depending on the strategy being implemented.

There are several types of irrevocable trusts commonly used for advanced estate planning purposes. Spousal Lifetime Access Trusts (SLATs) allow one spouse to make completed gifts for the benefit of the other spouse and future beneficiaries, while still preserving indirect access to trust assets during the beneficiary spouse’s lifetime. Dynasty trusts are designed to hold and protect family wealth for multiple generations while minimizing future estate taxation at each generational level.  Irrevocable Life Insurance Trusts (ILITs) are a tool to either remove a life insurance policy and death benefit from the estate or purchase insurance policy on behalf of the family to provide liquidity for the estate.  Note that if an existing policy is transferred to an ILIT, there is a 3-year lookback period, meaning if the policy owner dies within 3 years of the transfer the death benefit is brought back into the estate.  We’d recommend confirming with your legal professional for additional requirements regarding ILITs as each policy and Trust is unique.

These are just a few more common types irrevocable trusts, while others focus on more specific variables such as interest rates, loans, and income tax planning  Given the complexity and evolving nature of estate and tax law, these strategies should be evaluated carefully with estate planning attorneys, CPAs, and financial advisors to ensure they align with a family’s long-term goals and liquidity needs.

5) Charitable Strategies

The What

Charitable giving has always sat at the intersection of family values and tax efficiency, but OBBBA has reshaped the income tax side of that equation. Beginning with tax years after December 31, 2025, itemized charitable deductions are deductible only to the extent they exceed 0.5% of the donor’s adjusted gross income (AGI). For high-AGI households, this creates a meaningful annual “deductible floor” that small or routine annual gifts may not clear, which makes the structure and timing of charitable gifts more important than ever.

A second OBBBA hurdle is for taxpayers in the top 37% federal bracket. These families will no longer get the full 37 cents of tax savings per dollar of itemized deduction. Their benefit is capped at 35 cents for deduction purposes. For a $100,000 charitable gift that would have produced $37,000 in tax savings in 2025, this now produces $35,000 in 2026. This cap sits on top of the 0.5% AGI floor, which means top-bracket donors are hit twice. The combined effect is modest in percentage terms but meaningful in dollar terms for larger gifts. This makes timing, bunching, and AGI-reduction tools like QCDs more important than ever. For more information on these strategies, please see the following link for additional information: https://www.dafgiving360.org/tax-2026

Its also worth noting alongside the floor and cap that OBBBA also made permanent the 60% of AGI annual deduction limit for cash gifts to public charities, with a 30% limit for gifts of appreciated long term securities.  Starting in 2026, non-itemizers can deduct $1,000/single filers and $2,000/married couples of cash gifts direct to charities.

Beyond making charitable contributions out of the goodness of your heart, well-structured giving also delivers real planning benefits such as income tax efficiency, concentrated-position management, and multi-generational legacy planning. Several tools remain particularly attractive in the post-OBBBA environment.

The How

The most common planning response to the new AGI floor is bunching, which involves concentrating multiple years of charitable giving into a single tax year (often via a donor-advised fund) so that total gifts comfortably exceed the floor and itemizing makes sense, while using the standard deduction in off-years. Beyond bunching, four vehicles deserve attention:

• Donor-Advised Funds (DAFs)
  • Allow front-loading of deductions in high-income or liquidity-event years while spreading the actual grantmaking over time. Particularly powerful when funded with appreciated long-term securities.
• Qualified Charitable Distributions (QCDs)
  • For clients age 70 ½ or older, direct IRA to charity transfers (up to $111,000, per individual in 2026, indexed for inflation) satisfy required minimum distributions, when of age, without increasing AGI, effectively bypassing the new 0.5% floor entirely.
• Charitable Remainder Trusts (CRTs)
  • Useful for clients holding highly appreciated, low-basis concentrated positions who want diversification, an income stream, and to leave a charitable legacy, with the trust’s sale of the appreciated asset deferring capital gains and a partial charitable deduction available at funding.
• Naming Charities as IRA Beneficiaries
  • One of the most tax-efficient charitable legacy strategies available. Traditional IRAs left to non-spouse beneficiaries, under the SECURE ACT, must now deplete inherited IRAs within 10 years, often during their own peak earnings years. A qualified charity, by contrast, pays no income tax on IRA proceeds and receives 100% of the account. For clients with charitable intent, the planning move is often to direct IRA dollars to charity (or a charitable remainder trust naming the IRA as beneficiary) and leave step-up-eligible taxable accounts to heirs, resulting in a meaningful increase in what the family and the charity receive on an after-tax basis.
  • For clients who want to give to multiple charities or retain flexibility to change recipients over time, name a donor advised fund (DAF) as the IRA beneficiary can be a better alternative to listing individual charities directly.

Even with a more permanent federal framework, the work of administering an estate hasn’t gotten any simpler. The successor trustee role remains complex and time-consuming, and Weatherly continues to serve as quarterback alongside your team of professionals. Our Estate Settlement Checklist still can be referenced for key steps during the nine months of estate administration.

How WAM Can Help

Five years ago, the conversation was about racing the clock against an anticipated TCJA sunset. Today, the conversation is calmer but no less important. The question shifts from “how do we use the exemption before it disappears” to “how do we build a plan that works across the federal estate tax, the income tax, state-level exposures, and a family’s actual goals.”

That requires coordinated work across the board with your financial professionals, including estate attorneys, CPAs, insurance professionals, and your wealth management team. It also requires a willingness to revisit plans every few years as laws and life circumstances evolve and change. Through collaboration with your trusted professionals and next generation beneficiaries, Weatherly continues to leverage financial and investment planning techniques to create a Ripple Effect across your interconnected family and community.

Please reach out to a Weatherly Advisor for any assistance we can offer your family.

 

** The information provided should not be interpreted as a recommendation; no aspects of your individual financial situation were considered. Weatherly is a registered investment advisor and does not provide legal advice. Always consult your trusted financial and legal professionals before implementing any strategies derived from the information above.  This blog was developed with the assistance of artificial intelligence (“AI”) tools. These tools were used to help generate initial outlines, organize ideas, and improve efficiency in communication and grammar.