TCJA Sunset and the One Big Beautiful Bill Act: Where are We Now and What You Need to Know
We are quickly approaching the midpoint of 2025 and significant changes are on the horizon for federal estate and gift tax planning. The scheduled sunset of the 2017 Tax Cuts and Jobs Act (TCJA) and the recent passage of the One Big Beautiful Bill Act by the House of Representatives have created both uncertainty and opportunity for high-net-worth individuals and families. Here’s what you need to know.
The TCJA Sunset: Looming Reduction in Estate Tax Exemption
The TCJA, enacted in 2017, nearly doubled the federal estate, gift, and generation-skipping transfer (GST) tax exemptions. For 2025, the exemption stands at $13.99 million per individual (or $27.98 million for married couples). However, unless Congress acts, these elevated exemption amounts will expire on December 31, 2025. Beginning January 1, 2026, the exemption is scheduled to revert to its pre-TCJA level, adjusted for inflation—estimated to be around $7 million per individual (or $14 million for married couples).
Key implications:
Estates exceeding the reduced exemption amount would be subject to a 40% federal estate tax on any amount in exceeding the exemption amount.
Gifts made before the sunset can “lock in” the higher exemption, and current IRS guidance provides that there will be no “clawback” for completed gifts if the exemption drops.
The One Big Beautiful Bill Act: House-Passed Legislation
Last month, the House of Representatives passed the One Big Beautiful Bill Act, a sweeping budget reconciliation bill that, among other things, addresses the impending TCJA sunset. The bill now awaits Senate consideration, and, if the law is finally passed, its provisions appear very likely to change. The House version includes several key estate planning provisions:
“Permanent” Increase in Estate Tax Exemption: The bill would “permanently” increase the federal estate, gift, and GST tax exemption to $15 million per individual (indexed for inflation after 2025). It is important to understand that permanent in this context is meant to differentiate it from a law that will sunset at some point in the future. It does not mean it can never be changed by a future Congress.
No Change to Estate Tax Rate: The top federal estate tax rate would remain at 40%.
What Should You Do Now?
While there does seem to be momentum to permanently increase the estate tax exemption, passage of the One Big Beautiful Bill Act by the Senate “as is” seems unlikely. Given the uncertainty, individuals with net worths above $7 million or couples in excess of $14 million should consider the following steps:
Meet with Your Estate Planning Attorney Now: While it is hard to act with all of the current uncertainty, waiting to find out how this plays out is probably a bad idea. Depending on the situation, it may be necessary to create trusts now that are only funded if it begins to appear likely that TCJA will expire. Waiting will not leave sufficient time for the work that would be required to implement these complex planning structures.
Review Current Estate Plans: Ensure your plan is structured to take advantage of the current high exemption.
Consider Lifetime Gifting: Making large gifts before the end of 2025 can lock in the higher exemption, even if the law changes later. For some estates this may be advisable without regard to what ultimately happens with TCJA.
Monitor Legislative Developments: Stay in close contact with your estate planning attorney for updates as the Senate considers the One Big Beautiful Bill Act.
For higher net worth individuals, the next several months will be critical for estate planning. Whether the TCJA sunset occurs as scheduled or Congress enacts new legislation, clients with significant wealth should act now to preserve planning flexibility and minimize potential estate tax exposure.
This post was originally written in June 2025 and is not being updated based on legislative developments that occur.
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.