Patrick Carlson, JD, LLM

Jul 10, 2025

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Estate Planning Under the Big Beautiful Bill

The landscape of estate planning has shifted dramatically with the passage of the One Big Beautiful Bill Act (OBBBA). For financial advisors, understanding these changes is crucial for guiding clients through a new era of permanent estate tax rules that fundamentally alter planning strategies.

The game has changed: OBBBA rewrites estate tax rules

The OBBBA eliminates the looming 2026 sunset provision and establishes permanent estate tax rules with a $15 million federal exemption per person starting in 2026, rather than the estimated $7.3 million that would have resulted from the sunset. This isn’t just a temporary reprieve—it’s a complete restructuring of how we approach estate planning.

That said, when we say “permanent,” we mean until Congress decides to change the law again. The exemption amounts will continue to be indexed for inflation, providing some predictability that has been absent since the Tax Cuts and Jobs Act’s temporary provisions.

What stays the same vs. what’s new

Several key elements remain unchanged. The estate tax rate stays at 40%, portability between spouses continues to allow surviving spouses to use their deceased spouse’s unused exemption, and grantor trust rules remain intact.

However, the dramatically higher exemption threshold means fewer estates will face federal taxation. For married couples, the combined exemption reaches $30 million, fundamentally changing who needs aggressive estate tax planning.

Why clients still need to plan

Don’t mistake higher exemptions for reduced planning needs. Federal estate tax remains a concern for high-net-worth families, and state estate taxes continue to apply in many jurisdictions with much lower thresholds. States like New York, Massachusetts, and others maintain their own estate tax regimes that can significantly impact your clients’ wealth transfer strategies since state exemptions can be as low as $1 million.

Beyond taxes, proper estate planning provides crucial benefits that the OBBBA doesn’t address: asset protection from creditors, divorce protection for beneficiaries, and structured distributions that protect against financial mismanagement. These non-tax benefits often justify sophisticated planning even when federal estate taxes aren’t a concern.

Consider non-grantor trusts to create a SALT income tax deduction opportunity

Perhaps the most immediate planning opportunity comes from the OBBBA’s increase of the state and local income tax (SALT) deduction cap to $40,000 for married couples earning up to $500,000. This creates a potentially compelling case for implementing irrevocable non-grantor trust strategies.

Each non-grantor trust receives its own $40,000 SALT deduction limit, potentially multiplying deduction opportunities for clients with substantial state tax liabilities. Additionally, by removing income from the grantor’s return, these trusts can help keep the grantor’s income below the $500,000 threshold that allows the full $40,000 deduction. Non-grantor trusts now deserve an additional look as a planning option. 

Consider ING trusts: The new planning frontier

Incomplete gift, non-grantor trusts, commonly known as ING trusts, are another option to consider under the new tax landscape. These trusts come in different flavors depending on their jurisdiction:

• WING trusts (Wyoming Incomplete Gift Non-grantor trusts)
• NING trusts (Nevada Incomplete Gift Non-grantor trusts)
• DING trusts (Delaware Incomplete Gift Non-grantor trusts)

These trusts are structured so that transfers are incomplete for gift tax purposes while maintaining non-grantor status for income tax purposes. This means no gift tax is triggered on funding preserving estate tax planning flexibility with the higher exemptions, yet the trust pays its own income taxes separately from the grantor.

For clients in high income tax states, properly structured ING trusts established in no-tax jurisdictions like Nevada can eliminate state income tax on trust income while also reducing income on the grantor’s tax return, potentially making it easier to fall underneath the $500,000 threshold for the full $40,000 SALT deduction. A win-win.

Strategic considerations for advisors

The OBBBA creates a planning environment where income tax optimization may outweigh estate tax concerns for many clients. Consider these strategies:

Income tax focus: With higher estate tax exemptions, shift planning emphasis toward income tax efficiency, particularly for clients in high income tax states or those clients whose net worth is unlikely to ever exceed the estate tax exemption.

Multiple trust structures: Consider establishing multiple non-grantor trusts to maximize SALT deduction benefits while providing asset protection and distribution flexibility. For some clients, QSBS stacking using non-grantor trusts can provide additional boost to early stage investments. 

State law variations: Be aware that some states like California have enacted legislation targeting ING trusts, requiring careful jurisdiction selection and ongoing monitoring.

Timing considerations: The current environment favors immediate implementation of income tax-focused strategies rather than waiting for potential future estate tax changes.

Looking forward

The OBBBA represents a fundamental shift from temporary, uncertain tax rules to a more permanent planning environment. While federal estate taxes remain relevant for the ultra-wealthy, the focus has shifted toward income tax optimization and non-tax benefits of trust planning.

For financial advisors, this means reframing estate planning conversations around income tax efficiency, asset protection, and structured wealth transfer rather than purely estate tax avoidance. The new $40,000 SALT cap combined with strategic use of non-grantor trusts creates immediate opportunities for tax savings that many clients can implement today.

Success in this new environment requires staying current with evolving regulations, understanding the interplay between federal and state tax rules, and maintaining flexibility as Congress continues to refine these “permanent” provisions. The OBBBA may have changed the rules, but it hasn’t eliminated the need for sophisticated planning—it’s simply redirected where advisors should focus their expertise.

The information provided here does not constitute legal, financial, or tax advice. It is provided for general informational purposes only. This information may not be updated or reflect changes in law. Please consult with an estate attorney, financial advisor, or tax professional who can advise as to your particular situation.