The 2025 Estate Tax Exemption Is Here to Stay

September 14, 2025

Estate planning has long been a moving target for high-net-worth families, marked by uncertainty and shifting legislation. For years, many have been preparing for the anticipated sunset of the federal estate tax exemption at the end of 2025. However, 2025 has brought long-awaited clarity. On July 4, the newly signed “One Big Beautiful Bill” (OBBB) officially locked in higher federal estate tax exemptions for the foreseeable future—reshaping the landscape for wealth transfer planning. 

This legislation, enacted during President Trump’s second term, solidifies and enhances the gains introduced by the Tax Cuts and Jobs Act (TCJA) of 2017, giving families greater certainty around long-term estate planning. 

Here’s what you need to know about the updated estate tax exemption and how it may affect your wealth transfer strategy. 

A Major Win for Estate Planning 

Until now, estate planners had been preparing for a significant rollback—commonly referred to as the “Estate and Gift Tax Exemption Sunset”—which was set to occur in 2026 and would have reverted exemption levels to their pre-2018 amounts, potentially subjecting a greater portion of individual estates to federal taxation. That’s when the TCJA’s temporary estate tax provisions were scheduled to sunset, effectively cutting the exemption in half. But with the passage of OBBB, the elevated thresholds are not only extended—they’re increased. 

Under the new law: 

• Single filers will receive a $15 million estate tax exemption starting in 2026 
• Married couples filing jointly will benefit from a $30 million exemption 
• These amounts will continue to be indexed for inflation, ensuring they rise over time. 

This shift is especially meaningful for affluent families who have been weighing large wealth transfers or the creation of sophisticated trust structures in anticipation of a drop in the exemption. 

2025 Exemption Levels Still Apply This Year 

While the OBBB locks in higher exemption thresholds for 2026 and beyond, the IRS has also released updated exemption figures for 2025. Even before the bill was signed, inflation adjustments had already bumped the estate tax exemption to: 

• $13.99 million for single filers 
• $27.98 million for married couples 

That’s up from $13.61 million and $27.22 million, respectively, in 2024. 

These numbers remain in effect through December 31, 2025. Starting January 1, 2026, the OBBB’s higher $15 million/$30 million exemption kicks in. 

What About the Estate Tax Rate? 

While the exemption has grown, the top federal estate tax rate remains 40%. Estates that exceed the threshold will be taxed at graduated rates, ranging from 18% to 40% based on the amount above the exemption. 

Here’s a quick overview: 

Taxable Amount (Excess Over Exemption)	Rate
$0 – $10,000	18%
$10,001 – $20,000	20%
$20,001 – $40,000	22%
$40,001 – $60,000	24%
$60,001 – $80,000	26%
$80,001 – $100,000	28%
$100,001 – $150,000	30%
$150,001 – $250,000	32%
$250,001 – $500,000	34%
$500,001 – $750,000	37%
$750,001 – $1,000,000	39%
Over $1,000,000	40%

The good news for many wealthy families is that fewer estates will cross these thresholds now that the exemption levels are higher. That translates to fewer families paying the estate tax—and potentially more wealth staying in the family. 

State-Level Estate and Inheritance Taxes Still Matter 

Even with generous federal exemptions, state estate taxes can still create tax liability—especially in states where exemptions are far lower or not inflation-adjusted. 

For example: 

• Massachusetts has an estate tax exemption of just $2 million 
• Oregon and Illinois also impose estate taxes with relatively low thresholds 
• Nebraska and Kentucky levy inheritance taxes, which are paid by the recipients of inherited assets, not the estate 

These state-level taxes can significantly affect heirs, even if an estate avoids federal tax. As such, high-net-worth individuals should consider both state and federal rules when developing their estate plans. 

With the Sunset Off the Table, What Should You Do Now? 

The anticipated reduction in the federal estate tax exemption—originally set for 2026—is no longer on the horizon. While this removes a major source of planning pressure, it doesn’t mean you should pause or delay your estate strategy.  A stable exemption environment is an ideal time to act. 

Here are a few proactive steps to consider: 

• Review and update your estate plan: If you made accelerated gifts or created trusts in anticipation of the sunset, revisit your documents with your advisor to ensure they still align with your goals under the new law. 
• Reassess gifting strategies: With more room under the lifetime exemption, you may want to continue or expand your tax-free giving—whether through direct gifts to heirs, 529 plans, or charitable vehicles like donor-advised funds or charitable trusts. 
• Revisit trust structures: Irrevocable trusts, SLATs (Spousal Lifetime Access Trusts), GRATs (Grantor Retained Annuity Trusts), and other vehicles still offer benefits beyond tax avoidance—including asset protection, control, and legacy planning. 
• Integrate with income and business planning: For those with closely held businesses, investment entities, or significant real estate, now is a good time to align your estate strategy with business succession and long-term income planning. 
• Stay flexible and informed: While the law is now more stable, tax policy is always subject to change. Building flexibility into your plan can help ensure it holds up under future tax regimes. 

Looking Ahead 

The permanence of the higher exemption amount provides welcome clarity—but it may not be truly “permanent.” Future administrations and shifting Congressional majorities could revisit estate tax laws down the road. 

That said, the One Big Beautiful Bill gives affluent families a clear, favorable window to plan effectively. Whether you’re focused on transferring a business, funding a multi-generational trust, or simply ensuring your heirs avoid estate tax exposure, the current environment is ideal for reviewing and refining your plan. 

With higher federal exemption thresholds now enshrined into law, 2025 offers both clarity and opportunity. Working with your estate attorney, tax advisor, and financial planner, you can ensure your legacy strategy reflects the latest law—and protects your wealth for generations to come. 

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This content is for informational purposes only and does not constitute legal or tax advice. Please consult your legal or tax advisor for specific guidance tailored to your situation. First Western Trust Bank cannot provide tax advice. Please consult your tax advisor for guidance on how the information contained within may apply to your specific situation.