Estate Planning Provisions In The One Big Beautiful Bill Act

Key Takeaways

1. The Act permanently extends the doubled gift, estate, and generation-skipping tax exclusion amount to $15 million per individual and $30 million per married couple, indexed for inflation.
2. The Act broadens 529 plan qualified expenses and introduces "Trump" accounts with a $1,000 government contribution for eligible children, allowing additional contributions up to $5,000 indexed for inflation.
3. The Act reduces the minimum holding period required for Qualified Small Business Stock, as well as increasing the threshold for eligibility and the flat cap on maximum excludable capital gain.

On July 4, 2025, the One Big Beautiful Bill Act (the Act) was signed into law, ushering in a series of important changes to federal estate planning, charitable giving, and tax laws. The Act introduces several key provisions that will impact individuals, families, and fiduciaries engaged in estate and charitable tax planning, including:

Estate and gift tax

• The Act permanently extends the doubled gift, estate, and generation-skipping tax exclusion amounts implemented by the 2017 Tax Cuts and Jobs Act,¹ which were set to expire on December 31, 2025. These amounts are increased to $15 million per individual and $30 million per married couple, indexed for inflation. The increased exclusion amount for estate and gift tax will be effective for gifts made and estates of decedents dying after December 31, 2025.
• The Act makes permanent the removal of miscellaneous itemized deductions for trusts and estates. This is retroactive and applies from December 31, 2017.

Charitable giving

• Taxpayers who do not itemize deductions may now claim a charitable income tax deduction of up to $1,000 and $2,000 for married couples filing jointly.
• For taxpayers who itemize charitable deductions, a 0.5% (based on the contribution base) floor is imposed on charitable contribution deductions. Corporate taxpayers are now subject to a 1% (of the contribution base) floor on charitable contribution deductions.
• The higher contribution limitation for cash gifts to qualified charities is permanently extended.²

529 plan and "Trump" accounts

• The Act broadens³ the definition of qualified educational expenses for students attending elementary and secondary public, private, or religious schools. Effective for distributions made after July 4, 2025, eligible expenses now also encompass costs for tutoring, educational therapy for students with disabilities, standardized testing fees, college entrance examinations, advanced placement exams, and related books and educational materials. Beginning January 1, 2026, the total limit for all eligible expenses for K-12 education will rise to $20,000 per year, from $10,000.
• The Act establishes new Trump accounts, a type of individual retirement account designed specifically for minors. The government will contribute $1,000 to a Trump account for each U.S. citizen child with a valid Social Security number who is born between December 1, 2025, and December 31, 2028. Trump accounts may also be created for minors who were born outside this window, and all Trump accounts may receive up to $5,000 in additional contributions—meaning family members and others may also contribute to the accounts, with this limit indexed for inflation. A contribution from an individual to a Trump account will count against such individual's annual exclusion for gifts to the beneficiary of the account, so donors will need to weigh gifting to Trump accounts versus other vehicles. Earnings within these accounts will grow on a tax-deferred basis. Funds in these accounts are required to be invested in low-cost stock mutual funds or exchange-traded funds that track a U.S. stock index, such as the S&P 500. Withdrawals made after age 18 are generally subject to the same rules as individual retirement arrangement distributions, with some additional tax benefits.

Qualified small business stock

• For qualified small business stock (QSBS) issued after July 4, 2025:
  • The Act reduces the minimum holding period required to qualify for tax benefits on the sale of QSBS from five years to three years, with a phased exclusion available for holding periods between three and five years.
  • The threshold for corporations eligible to issue QSBS has significantly increased from $50 million to $75 million in gross assets,⁴ and this limit will now be adjusted annually for inflation.
  • The flat cap on the maximum excludable capital gain from QSBS issued by a single company has been raised from $10 million to $15 million, subject to annual inflation adjustments. The alternative cap, based on ten times the taxpayer's adjusted basis in the QSBS, remains unchanged under the Act.

Implications for Clients

These legislative changes present new planning opportunities and considerations for clients, particularly those who have already maximized their previous exclusions, as they offer a renewed opportunity to minimize tax liabilities while continuing to support family and charities through gifts. We encourage clients to review their estate plans and charitable giving strategies in light of these developments. For more information or to discuss how these changes may affect your estate plan, please contact your lawyer at Perkins Coie.

Footnotes

1. Currently set at $13.99 million.

2. Previously, taxpayers could not deduct more than 50% of their adjusted gross income (AGI) as a charitable deduction in any year, with a 60% limit for cash-only contributions to certain charities. These charities include churches, schools, and hospitals. The Act now makes this rule permanent. Taxpayers can deduct these cash gifts if the total amount of cash contributions does not exceed 60% of their AGI minus the total amount of contributions made to charities during the same tax year.

3. Traditionally, 529 plans have permitted tax-free and penalty-free withdrawals solely for qualified educational expenses. These have included tuition for elementary, secondary, and post-secondary schools, as well as mandatory fees, books, supplies, and equipment required for attendance at a post-secondary institution.

4. A corporation's "aggregate gross assets" (cash and the tax basis of other property held by the corporation) must not exceed such limit at all times before and immediately after the issuance of the QSBS.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.