Signed into law on July 4, 2025, the “One Big Beautiful Bill Act” (OBBBA) brings permanent and expanded relief in estate, gift and generation-skipping transfer (GST) tax planning. Below is a summary of key provisions:
Estate, Gift & GST Tax Exemption Expansion
The OBBBA permanently increases the unified federal estate and gift tax exemption to $15 million per person ($30 million per married couple), effective for gifts and deaths after December 31, 2025. These thresholds will be indexed for inflation on an annual basis. The annual gift tax exclusion is unchanged at $19,000 per donee (will remain the same in 2026). The Connecticut estate and gift tax exemption automatically matches the federal exemption. However, the New York estate tax exemption ($7,160,000 in 2025 adjusted annually for inflation) is not affected by the OBBBA.
“Trump” Accounts
Beginning July 4, 2026, a custodial account may be established on behalf of a minor child that can receive nondeductible contributions up to $5,000 annually (indexed for inflation starting in 2028) in the aggregate from individuals. Employers may also make more limited contributions. No distributions can be taken from the account until the child reaches age 18, at which point the account effectively becomes an IRA and standard IRA rules govern. (Earnings are taxed when withdrawn unless withdrawn after age 59 ½.) The government will also seed the account with a one-time $1,000 contribution for a child born in 2025–2028 (which would not count against the $5,000 limit). Account investments are limited to certain designated asset types. There is not a lot of guidance on these accounts yet.
529 Accounts
Beginning July 5, 2025, eligible education expenses for 529 Account purposes are expanded to include, for example, books, tutoring, standardized testing fees, college admission examinations and educational therapies (applicable to public, private and religious schools). State law may differ regarding these eligible expenses. After December 31, 2025, the annual K-12 expense cap is increased from $10,000 to $20,000.
SALT Deduction
The $10,000 SALT (state and local tax) deduction cap (in place since 2018) temporarily increases to $40,000 for 2025-2029 and phases out for those with modified adjusted gross income (MAGI) over $500,000 (and reverts to $10,000 once MAGI is over $600,000). The SALT deduction and the MAGI amount increase by 1% for each of 2026-2029. For non-itemizers, the standard deduction is $15,750 for single filers and $31,500 for married couples in 2025 (indexed for inflation).
Charitable Deduction
Itemizers: Effective in 2026, itemizers must now exceed a threshold of 0.5% of their adjusted gross income (AGI) before any charitable gifts become deductible. Additionally, taxpayers in the top 37% bracket will have their deduction’s tax benefit capped at 35% of AGI (i.e., every $1,000 donated yields a maximum of $350 in tax savings, rather than the former $370).
Non-Itemizers: Effective 2026, non-itemizers can deduct up to $1,000 (or $2,000 for joint filers) for charitable gifts (excluding gifts to Donor Advised Funds).
For more information or to review and update estate plans in light of these provisions, please contact Lauren R. Cimbol (lcimbol@brodywilk.com) or another BW Trusts & Estates attorney. To learn how the OBBBA impacts businesses and investors, read our companion article on this topic here.
