OBBA Estate Planning now, more than ever, involves use of disclaimer (credit shelter) trusts as the Federal Exemption Soars to $15 Million—but New York’s $7.16 Million “Cliff” Still Looms
1. A (Very) Big Independence-Day Signature
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (“OBBBA”) into law. The 870-page reconciliation package makes headline-worthy tax changes, but the marquee item for estate planners is a permanent increase of the unified estate, gift and generation-skipping-transfer (GST) tax exemption to $15 million per individual ($30 million per married couple) starting in 2026, indexed for inflation thereafter. In doing so, Congress eliminated the “sunset” that would have cut the exemption roughly in half on January 1, 2026.
2. Key Numbers at a Glance for OBBA Estate Planning
| Calendar Year | Exemption Per Person | Basis for Future Indexing | Top Federal Transfer-Tax Rate |
| 2025 (current) | $13.99 M | N/A (TCJA rules) | 40 % |
| 2026+ (OBBBA) | $15 M plus inflation | 2025 reset year | 40 % |
Portability between spouses is unchanged, and the annual gift-tax exclusion remains $19,000 for 2025 (adjusted annually).
3. Don’t Forget Albany: New York’s Separate Estate Tax
| 2025 Exemption | Portability? | “Cliff”/ Add-Back? | Top Rate |
| New York State – $7.16 M per decedent (Jan 1–Dec 31 2025) | No | Yes. If the taxable estate > 105 % of the exclusion, the entire estate (not just the excess) is taxed. 3-year gift add-back applies (§ 952(c)). |
4. Federal vs. New York Estate-Tax Snapshot – OBBA Estate Planning
| Federal (OBBBA) | New York (2025) | |
| Exemption per person | $13.99 M in 2025 IRS → $15 M on 1/1/26 | $7.16 M (indexed annually) NY Tax Department |
| Portability between spouses | Yes | No |
| Top rate | 40 % | 16 % |
| Gift add-back | None | 3-year look-back (§ 952[c]) |
| “Cliff” effect | N/A | If taxable estate > 105 % of exclusion, whole estate is taxed |
5. What Didn’t Change
- GST rules & portability mechanics remain intact.
- Valuation discounts, GRATs, IDGTs and other “freeze” techniques are untouched.
- No change to the 40 % top rate or to Section 1014 basis-step-up at death.
- State estate taxes are still in play—New York’s exclusion is projected to be about $6.94 M on Jan 1, 2026, creating a potential “tax cliff” for estates between the NY and federal thresholds.
6. OBBA Estate Planning Opportunities—and Pitfalls—to Review Right Now
| If Your Net Worth Is… | Why OBBBA Matters | Next Steps |
| Under $7 M / $14 M (couple) | Federal estate tax likely eliminated; NY estate tax may still bite. | Focus on state tax mitigation (gift to non-residents, life insurance trusts), probate avoidance, step-up preservation. |
| $7 M–$15 M / $14 M–$30 M | Federal exposure reduced to zero or near-zero, but could return if Congress revisits the rules. | Reassess aggressive 2025 “use-it-or-lose-it” gifting plans; you may have breathing room but still need flexibility (e.g., disclaimer trusts). |
| Above $15 M / $30 M | Dollar of exposure drops, but strategy toolbox is largely unchanged. | Consider: §2701/2702 freezes, installment sales to IDGTs, valuation discounts, long-term GRAT stacking, dynasty trusts to lock in GST shield. |
Watch the politics. “Permanent” in tax legislation is only as durable as the next Congress. Model scenarios assuming a future rollback to $7 M and keep documents and gifting vehicles flexible.
7. Action Checklist for 2025–2026 for OBBA Estate Planning
- Inventory your used exemption—IRS Form 709 history + projected 2025 gifts.
- Refresh net-worth statements using 2025 fair-market values; consider professional valuations for closely-held entities.
- Update dispositive documents to remove formula clauses pegged to the “maximum amount that can pass free of federal estate tax” unless they now overfund credit-shelter trusts.
- Coordinate with state planning—for New York families, test whether outright gifts or QTIP “Santa Claus” elections can keep you under the NY cliff.
- Review life-insurance funding; higher exemption may alter ILIT funding needs.
- Educate fiduciaries on portability deadlines (Form 706 within 9 months of death).
- Calendar a 2026 strategy session—regardless of politics, inflation indexing will change the exemption again on January 1, 2027.
8. Quick-Answer FAQs
Q: What is the new federal estate-tax exemption in 2026?
A: $15 million per individual ($30 million per married couple), indexed for inflation. JD Supra
Q: Does New York match the federal exemption?
A: No. New York’s exclusion is $7.16 million in 2025 and is not portable between spouses. NY Tax Department
Q: Will my 2025 gifts be added back in New York?
A: Yes—taxable gifts made within three years of death are added back to the NY estate, potentially pushing you over the cliff.
Ready to Engage in OBBA Estate Planning?
Plan today, so the only fireworks your heirs see are on July 4th—not when the tax bill arrives.
For more information, please contact NYC Probate Litigation, Guardianship, Probate, and Estate Planning attorney Regina Kiperman:
Phone: 917-261-4514
Fax: 929-556-2089
Email: rkiperman@rklawny.com
Or visit her at:
40 Wall Street
Suite 2508
New York, NY 10005
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