The New Gift Tax Normal: Optimizing Strategic Gifting

As the end of the year approaches, it’s a good time to think about your gifting strategy now that the lifetime exclusion amount has been permanently set at $15 million per individual (with an indexing provision to account for inflation). High net worth individuals can capitalize on this new, stable window to establish a multi-generational wealth transfer strategy.

The Old Plan vs. New Certainty

Before the passage of the One Big Beautiful Bill Act (OBBBA), the previous tax law, the Tax Cuts and Jobs Act (TCJA), was set to expire at the end of 2025 and drastically roll back the exemption from $10 million per individual to $5 million.

OBBBA set the lifetime estate and gift tax exclusion permanently to $15 million per individual, or $30 million per married couple, avoiding the 40% federal transfer tax.

Additionally, a separate annual gift tax exclusion allows grantors to give $19,000 per recipient for 2025 and 2026 tax-free to an unlimited number of recipients without counting toward the lifetime $15 million exclusion. This annual gift tax exclusion will be adjusted annually for inflation after 2026.

Why You Should Act Now

Because the primary goal is to remove highly appreciating assets like stocks, real estate and business interests from your taxable estate before they grow further in value, a gift made now locks in the current, lower valuation.

The Internal Revenue Service (IRS) has also recently clarified that gifts made using the higher exemption amount cannot be subjected to estate tax if the exemption were to be decreased later, known as the “no clawback” rule. While the OBBBA makes this an unlikely scenario, it’s good to know the IRS has addressed that concern.

Gifting Tools that can Maximize the New Exemption

There are a handful of gifting options to consider, based on you and your beneficiaries’ circumstances:

Spousal Lifetime Access Trust (SLAT): This type of trust provides the grantor spouse access to trust assets during their lifetime for the benefit of the spouse beneficiary.
Grantor Retained Annuity Trust (GRAT): This trust option is suited toward transferring assets that are expected to grow significantly. By transferring those assets to a GRAT, heirs can benefit from future appreciation tax-free.
Irrevocable Life Insurance Trust (ILIT): An ILIT allows you to capitalize on the high exemption by transferring life insurance policies into the ILIT, removing the death benefit proceeds from the taxable estate.

Action Plan for 2026 and Beyond

There’s no time like the present to take control of your gifting strategy and estate plan. Get ahead of the game by following these steps:

Review your estate documents: Revisit your existing will, trusts and powers of attorney to ensure they reflect your current intentions and maximize the new, higher exemption amount.
Conduct a liquidity audit: Determine what assets in your estate are liquid versus illiquid (like a family business) and create a plan for potential estate tax liabilities above the new limit, as well as any state taxes.
Coordinate your advisory team: Make sure your estate planning attorney, Certified Public Accountant (CPA) and financial advisor are all on the same page.

Hackstaff, Snow, Atkinson & Griess is here to help.

If you’re looking to optimize your estate plan, our expert attorneys have the experience and knowledge to design a strategy that suits your needs. And, because life circumstances change, we’re here to help you as your estate planning needs evolve. Contact us today for a free consultation.