The July 4 Surprise: The New Estate Tax Bill Raises the Bar on Estate Planning and Estate Taxes…But Are You Really in the Clear?

While the 2025 estate‑tax cliff is now averted, the real clock starts to run on smarter estate‑planning, gifting, and asset‑protection strategies for your heirs.

Executive Summary

In 2025 you had an exemption (the amount that you can leave your heirs without the 40% federal estate tax) of $13,990,000.  For couples, the amount is doubled if you either use both exemptions or use something called “portability” when the first spouse passes away.

However, as you know from our warnings, this large exemption was set to fall back to $5,000,000 per person at the end of 2025. That posed significant problems for many of our clients who had to consider “using or losing the larger exemption.”

But on the 4^th of July, the law changed! So, what just happened and what does it mean for you and your loved ones?

The One Big Beautiful Bill Act (OBBBA) makes a $15 million per‑person estate, gift, and GST exemption the “new normal” and “permanent.” That higher exemption is indexed for inflation, so it may grow in the future, but every dollar above it is still hit by a 40 % federal tax. And while it’s called a “permanent change” (meaning it’s not set to automatically disappear or reduce), Congress can rewrite the rules at any time, and smart families are already doing other things to protect their assets for their heirs, and  locking in valuation discounts while the window is wide open.

If this all sounds confusing, that’s because it is. 

The government makes out better if you don’t do anything.  So it’s made deliberately complex and confusing.

And while the new exemptions are large, nothing has changed for very wealthy families (who still remain taxable at 40% on everything over the exemptions). And, for more modestly affluent families, there are still many things, besides federal estate tax, that drive estate planning such as protecting your heirs from divorce and lawsuits, as well as future taxes and state inheritance taxes, creating special needs trusts and custom planning for your personal situation, and protecting your legacy including vacation homes, family farms, and businesses.

So, what should you do?

Below is your detailed, plain‑English guide, including a three‑minute quiz and scorecard, to help households from the $2 million estate size range (including life insurance) all the way to  $100 million or more range to decide whether to relax, tweak, or overhaul their planning and what to do next in each case.

1. From Panic to Possibility - How We Got Here

For eight years, affluent families lived under a ticking “estate planning time bomb”: the 2017 Tax Cuts and Jobs Act (TCJA) that doubled the lifetime exemption, but only through December 31, 2025. Advisors everywhere urged clients to “use it or lose it,” flooding the planning world with last‑minute gifts and trusts.

Then came Independence Day 2025.

On July 4, President Trump signed the OBBBA, immediately:

• Raising the unified estate, gift, and GST exemption to $15 M per individual ($30 M married).
• Indexing that figure for inflation starting in 2027 (base year = 2025).
• Retaining portability for married couples.
• Keeping the 40 % tax rate on amounts above the exemption.
• Keeping the current annual lifetime gifting rules in place ($19k per year indexed for inflation)

Bottom line: The “sunset scramble” is over, but estate tax hasn’t disappeared - its threshold merely moved higher. Families now face fresh questions: “Do I still need to do anything?”, Should I still gift (knowing that in a smaller estate it could affect my long term care coverage)? Should I still use an ILIT (Irrevocable Life Insurance Trust) to keep insurance from being taxable?”, “How do we leverage this bigger exemption before it moves again?”

What follows should help with those and other questions…

2. Who Wins, Who Waits, Who Keeps Moving?

To help to clarify, let’s break our thinking about this into three practical groups. Each group has its own planning tempo and toolkit.

So which group are you in?

Before You Dive In

Remember that net‑worth boundaries are guidelines, not gospel. Liquidity, growth potential, and family goals matter as much as raw asset value. There are loads of other factors that you should consider in your estate planning…which is why our clients aren’t using Legal Zoom or AI estate planning tools.  They want to consider things including but not limited to taxes, assets and divorce protection, carrying on a family business or farm, leaving many forms of legacy and more.

The Three Groups:

1. Estates Under $5 Million – “Comfort Zone”

Families here are firmly below the federal estate‑tax radar—unless future politics slash the exemption dramatically (politically unlikely). Focus on:

1. Updating and improving core legal documents (wills, powers of attorney).
2. Beneficiary designations.
3. State death‑tax exposure (e.g., Pennsylvania inheritance tax).
4. Trusts (stand alone or under their wills) to protect the assets left to your heirs from divorce, lawsuits, and creditors.
5. Avoiding probate in other states (especially if you have a vacation home).

Why it still matters: Proper titling and beneficiary choices can save probate costs and keep family affairs private, even when federal tax isn’t an issue. Likewise, your wills can also contain trusts to protect heirs from risks other than federal estate tax.

2. $5 Million – $15 Million – “Yellow‑Flag Zone”

A higher exemption buys time, but growth could push these estates over the line. And/Or the federal exemption could at some future point be reduced again. Well informed clients in this group are still considering:

1. Spousal Lifetime Access Trusts (SLATs): Freeze asset values while preserving access.
2. Discounted gifts of LLC/FLP interests (either outright or in special trusts).
3. Grantor Retained Annuity Trusts (GRATs): Capture upside with minimal gift tax.
4. Using the GST Exemption to make trusts for their children untaxable at their children’s deaths so that they pass to grandchildren without estate tax.
5. Considering Charitable Gifts: Using your will or estate plan to make charitable gifts to important to you.

Takeaways: You don’t need emergency surgery, but you do need a check‑up. Even one strong market cycle—or a successful business sale—could turn today’s “safe” estate into tomorrow’s taxable headache.  You might also still make gifts but of a smaller size.  As you’ll see later, a strategy session is the best way to discover your new options.

3. Over $15 Million – “Red‑Alert Zone”

For these families, the higher exemption is welcome, yet every extra dollar is still exposed to a 40 % haircut. Typical moves include:

1. Dynasty (GST‑exempt) trusts to protect multigenerational wealth.
2. Intra‑family loans & sales using low Applicable Federal Rates (AFR).
3. Charitable lead trusts (CLTs) to offset tax while funding family objectives.
4. All of the Techniques in Group 2
5. Use of both exemptions through trusts or “Portability” both of which require action and attention.

Closing thoughts: For eight‑figure estates, the OBBBA is an invitation, not a reprieve, to lock in discounts, shift appreciation, and coordinate liquidity before the rules shift again.

It also gives families a real option to focus on legacy issues beyond just estate tax issues.

The following quick quiz should help you to get an idea where you fall and what you should do.

4. The Three‑Minute Estate‑Planning Quiz

Before you get lost in acronyms, take this quick diagnostic. If you answer Yes to any question, circle the points.  Once you’ve answered all the questions, add the points and go to the scorecard.

Done? Great—add the numbers and see where you land.

Reflection paragraph: Scores aren’t destiny, but they illuminate the issues that you and your family face. A low score says “you have time and can focus on what matters most.” A high score says “take advantage of this time to plan and consider doing something before Congress does.”

5. Strategies by Tier

Every planning tier has a toolkit. Below, each set of bullets begins with the why and ends with the what next.

Tier 1: Comfort‑Zone Housekeeping, Protecting Heirs and Legacy

Intro: Even without federal estate tax, poor paperwork can spark probate headaches, creditor exposure, or family feuds.

1. Beneficiary Audit – Pay attention to IRAs, 401(k)s, life insurance. These beneficiary designations trump your will.
2. Revocable Living Trusts – Avoid probate (especially for vacation homes), protect privacy.
3. Special Asset Protection Trusts Under Your Will to protect heirs from divorce and lawsuits.
4. Special needs and other trusts for special circumstances such as a disabled child or adult, or late life stage cognitive decay.
5. State Tax Check – PA inheritance tax, out‑of‑state property rules.

Planning Note: Think of Tier 1 work as routine dental care: inexpensive now, painful if ignored.

Tier 2: Growth, Legacy, and Mindset Safeguards

Intro: Yellow‑Flag families often straddle the line between no‑tax and possible very big‑taxes. The goal is to freeze values or shift future appreciation before it complicates life. You, like the group above, will also consider trusts for vacation homes to avoid multiple state probates, and trusts to protect your heirs.

1. SLATs – Gift assets to a trust benefiting your spouse while using your exemption.
2. QPRTs – Transfer a residence at a discount; regain use later.
3. Family Limited Partnerships (FLPs) – Gift fractional interests at minority discounts.
4. Roth Conversions – Swap future taxable growth for tax‑free.

Planning Note: Most of these moves are “elective surgery” so plan early, recover quickly, and enjoy long‑term benefits such as protecting your heirs and reducing taxes for generations.

Tier 3: Legacy Architecture, More Charitable Giving, And Higher Levels of Protection

Intro: Larger exemptions don’t “solve the problems” for estates of over $15,000,000 million dollars.  The focus here is often balancing the legacy you want to leave heirs with other aspects of legacy all the while trying to prevent “trust fund baby” heirs, encouraging productivity and contribution.

1. Dynasty Trusts – Shield assets for generations, skip future estate taxes.
2. Charitable Trusts (CLATs) and Charitable Foundations/Testamentary Giving– Front‑load charity, remainder to heirs gift‑tax‑free.
3. Installment Sales to Grantor Trusts – Freeze asset value and shift appreciation.

Planning Notes: Tier 3 strategies work best when your advisory team—legal, tax, investment, insurance are all directly involved and are all on the same page.

6. Case Studies—Real Moves, Real Strategies and Methods, and Real Savings

Stories crystallize strategy. Names and facts are changed, the lessons are real.

“The Millers” - $9 M & Growing
A biotech exit looms. They funded SLATs with pre‑IPO shares valued at $4 M. If shares triple post‑IPO, $8 M of growth stays outside their estate - forever.

“The Harrises” $15 M Family Farm & Farm Business
Land and business value appreciation threatened liquidity for a family as the taxes would be high and they wanted to retain, not sell the farm & farming businesses. A combination of strategies: use of a Pennsylvania family farm exemption for inheritance taxes, a GRAT (Grantor Retained Annuity Trust) to shelter rising acreage/business values, and a QPRT (Qualified Personal Residence Trust) to shifted the value of the residence portions of the homestead to the next generation. Estimated probate, inheritance and estate tax savings could be in the millions.

“The Smiths” $35 M 3rd Generation Family Business

When the next generation took over operations (but not yet ownership), they contemplated a large rebranding and expansion of a business already worth over $30,000,000.  But all of that growth (even now with the large exemptions) would be taxed at 40%. So, they formed a new business (owned by the next generation and protected in trusts) to handle some of the new work/lines of business and used minority discounting and gifts combined with trusts to lower or possibly even eliminate federal estate taxes.

NOTE: The methods used in each case differ, but the theme is constant: act strategically on customized planning before appreciation or legislation moves the goalposts.

7. “Timing the Estate Planning Market” (and Congress)

Intro: Successful planning isn’t about predicting every twist and turn in the world of tax law changes; it’s about acting thoughtfully during favorable conditions. **

1. Election Cycles: A political swing can lower exemptions overnight.
2. Interest‑Rate Windows: GRATs and intra‑family loans thrive on AFR interest rates.
3. Market Dips: Lower asset values mean lower gift‑tax cost for the same future upside.

** Note: Timing alone won’t save you, but combining strategy with favorable conditions compounds results, allows you to lower taxation and protect future generations from other risks as well, and to pass on a meaningful legacy.

8. Common Missteps to Avoid

Intro: The biggest wealth leaks aren’t exotic; they’re routine oversights. **

1. “Set‑It‑and‑Forget‑It” Wills – drafted for a $5 M exemption world where they might no longer work and won’t work as planned.
2. Underfunded or Overfunded ILITs – ignoring changing insurance needs and what is actually taxable
3. Skipping Basis Strategy – gifting low‑basis assets blindly so that the next generation pays unnecessary capital gains taxes.
4. No Liquidity Plan – estate costs and fees, as well as inheritance and estate tax is payable in cash, not farmland or business interests.  And, those costs and taxes are usually incurred within 9 to 15 months after death. Without planning, the estate could be left without liquidity to pay them.

** Note: A 60 to 90‑minute document review and strategy session today can prevent a multimillion‑dollar expense tomorrow.

9. What to do Next - Choose Your Path

Path A – Peace‑of‑Mind Check‑In and Expedited Strategy Session

For Quiz Scores 0–3 or Net Worth < $5 M

You’re outside the estate‑tax blast zone. There is nothing that you must do (because of the tax law changes) before the end of the year. However, if recent life events/changes/charitable goals suggest tweaks or changes to your foundational estate planning documents, call 610-933-8069 for a streamlined zoom call, document review and update.

Or if you want to add trusts to protect your heirs from divorce, creditors and lawsuits, call for the Zoom review by one of our trust and estate lawyers.  Call 610-933-8069.

Otherwise calendar a three‑year review.

For existing clients, the cost of that Zoom call and document review is $500 but that entire amount gets credited to any work you decide to have the firm do.

Path B – Strategic Deep‑Dive

For Quiz Scores of 4 + or Net Worth > $5 M

Leverage today’s $15 M shield while it lasts. Call 610-933-8069 to book your “Estate‑Tax Strategy Session” to:

• Audit current exemption usage.
• Stress‑test trusts, gifting, and liquidity.
• Identify and consider the right combination of techniques that are right for you and your family.
• Coordinate with your full advisory team.

Special offer: Call before September 30^th to book your strategy session in 2025 and you’ll get full credit for the cost of the consult on any work that the firm does, to carry out your legacy and estate planning, and you’ll receive one full Graduate E.P. Package (a $750 value) – make sure that your children or grandchildren headed to work or college have a durable and medical power of attorney in place.

9. Key Takeaways: Why This Still Matters

Higher “permanent” tax exemptions doesn’t really mean permanent. Congress giveth; Congress can taketh away.

1. $5 M–$15 M estates won breathing room to plan, not immunity from taxation.
2. Even smaller estate plans can become obsolete as time passes and changes occur in your business, life, and in the law.  Even small changes start to accumulate.
3. If you haven’t already done it, you may want special trusts (either during your lifetime, or under your will) to protect your heirs from divorce, lawsuits and creditors.
4. >$15 M estates stay squarely in the crosshairs of the IRS.
5. Changes in beneficiaries might be needed to make your plan work.
6. Early action and strategy beat perfect timing (or trying to predict the future) - every single time.

In closing, take the quiz, check your score, and pick your path.

FUTURE GENERATIONS WILL THANK YOU FOR ACTING TODAY.