OBBBA opens the door for advanced wealth transfer strategies

The One Big Beautiful Bill Act opens the door for advisors to implement advanced wealth transfer strategies in 2026.

Two estate and tax planning experts gave their advice on what strategies advisors can put in place this year during a webinar by the National Association of Insurance and Financial Advisors.

The OBBBA’s historic increase in the estate tax exemption creates a time-limited planning window, said Dawn Hallman, founder and principal attorney of Hallman and Associates in Norman, Okla.

The estate tax exemption went to $15 million on Jan 1, from $13.99 million in 2025. With no sunset provision attached to the increased exemption, advisors and their clients have planning certainty, she said.

For married couples, the estate tax exemption is now at $30 million. Estate tax exemption portability under Internal Revenue Code Section 2010(c) allows a surviving spouse to use the unused federal estate and gift tax exemption of their deceased spouse. The generation-skipping tax exemption is $15 million per individual ($30 million for married couples). This allows for tax-free transfers to grandchildren or "skip persons" up to this limit.

Clients who deferred gifting because of uncertainty about whether the tax laws sunset should transfer funds now to take advantage of this increased permanent exemption, Hallman said.

The OBBBA has several other tax provisions that impact estate planning, she said.

• Tax brackets under the Tax Cuts and Jobs Act are maintained. The seven tax brackets established under the TCJA – 10%, 12%, 22%, 24%, 32%, 35% and 37% - remain in place.
• Temporary increase in the state and local tax deduction. The SALT deduction is capped at $40,000 for the 2025 through 2029 tax years, with a phase-out for taxpayers with adjusted gross income above certain thresholds.
• Permanent standard deduction. The standard deduction is $31,500 for married filing jointly and $15,750 for single filers in 2026 and beyond. This creates planning implications for income-shifting strategies and timing of distributions.
• Special deductions. OBBBA provides for tips deduction for service workers, overtime premium deduction (capped at $12,500 for single filers and $25,000 for married filers), and a 6,000 increase in the standard deduction for tax filers over age 65. These deductions will remain in place for 2025 through 2028 only.

Hallman gave some tips to advisors who want to use OBBBA to communicate with clients.

• Clients with net worth in the $10 million-$15 million range who were previously concerned about the estate tax laws sunsetting in 2026 now have expanded planning capability. Schedule planning meetings to discuss how to use the permanent exemption. Document all client advice regarding timing of gifts and exemption usage for malpractice prevention.
• Document review. Existing estate plans drafted under the assumption that the laws would sunset this year may need revision for the new permanent exemption levels. Review credit shelter trust funding formulas. Update gifting strategies. Advise clients that the increased exemptions allow them to make larger lifetime gifts without triggering tax liability.

Tips for advising married and divorced clients

Clients who are married or divorced have distinct estate planning needs. Thomas E. Herr, attorney with Dunn Law Firm in Bloomington, Ill., described ways advisors can help them.

Married clients have considerations regarding portability, qualified terminable interest property trusts and basis.

• Portability election. A surviving spouse may claim the deceased spouse’s unused exemption. To do so requires filing IRS Form 706 on a timely basis, even if no estate tax is due. Under OBBBA, the spouse has access to a $30 million combined exemption.

 

• Lifetime gifting strategies. There is an unlimited marital deduction. Advisors and clients should consider an intentional deceased spousal unused exemption where the first spouse makes large gifts to use the exemption before death.

 

• QTIP trust interest. The marital deduction under the IRC defers estate tax to the surviving spouse’s death. The trustee may allow QTIP treatment on Form 706.
• Basis step-up. Allows a full step-up at first death for a decedent’s separate property. Community property receives a full step-up on both halves.

Planning for divorced clients involves complexity, he said. Estate planning before, during and after divorce is complex. Advisors should not do estate planning without coordination with the client’s divorce counsel.

Advisors should make sure clients update beneficiary designations on retirement accounts, life insurance and payable on death/transferable on death accounts.

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