Estate & Gift Tax Planning

After the One Big Beautiful Bill Act (OBBBA)

$15 million exemption per person (2026), permanent, indexed from 2027 → most estates owe no tax; focus on basis step-up. Portability needs a timely Form 706.

Gifting tools

• Annual exclusion $19,000 ($38,000 split).
• Direct tuition and medical payments: unlimited.
• Section 529 superfunding: 5 years at once ($95,000 per donor).
• Gift high-growth assets; grantor trusts (donor pays income tax).

Trusts

• Revocable: probate avoidance only; no estate tax savings.
• Irrevocable life insurance trust: proceeds outside estate (3-year rule for transferred policies).
• Grantor retained annuity trust: pass growth above the assumed rate.
• Charitable remainder trust: income stream + deduction + tax-free sale inside the trust.
• Dynasty trust: generation-skipping exemption.

Valuation and family

• Family partnerships: discounts for lack of control and marketability (needs business purpose).
• Marital deduction; qualified terminable interest property (QTIP) trusts; non-citizen spouse → qualified domestic trust.
• Buy-sell agreements for succession.

Exam traps

• Portability doesn't apply to the generation-skipping transfer exemption.
• Gifts to a trust qualify for the annual exclusion only if beneficiaries get withdrawal rights ("Crummey" powers) that make them present interests.
• If the donor dies during the 5-year Section 529 election period, the amounts allocated to later years return to the estate.