On July 4, President Trump signed into law the “One Big Beautiful Bill Act” of 2025. The legislation is 1,018 pages in length, and therefore certainly can be described as big. There is only one way in which this voluminous bill impacts estate planning. Effective January 1, 2026, 1 the estate and gift tax exemption will be set permanently at $15.00 million per person. 2 For the families of many wealthy taxpayers, the One Big Beautiful Bill Act of 2025 (“OBBBA”) is, indeed, a beautiful bill.
In this month’s update, I offer a few planning comments that are particularly relevant for Minnesota residents following the enactment of OBBBA.
- Minnesota Estate Tax Planning. OBBBA does not change Minnesota state estate tax rules. The Minnesota estate tax exemption will remain at $3.0 million per person into 2026, and beyond. Minnesota estate tax rules do not allow a surviving spouse to “port” a deceased spouse’s unused Minnesota estate tax exemption. Married Minnesota residents with at least $3.0 million in assets should continue to make use of a family trust structure. Assets owned by a surviving spouse of more than $3.0 million will result in a Minnesota estate tax of between 13% to 16%.
- Minnesota Gifting. Minnesota residents who expect to die with assets more than the exemption amounts should consider making gifts to children or grandchildren to minimize Minnesota estate tax exposure. In 2025, a single individual can give up to $19,000 per beneficiary per year as an annual exclusion amount If the value of annual gifts to any one individual is less than the annual exclusion amount, no gift tax return needs to be filed in the year(s) of the gifts, and the gifts pass free of Minnesota estate taxes. If a Minnesota resident makes a gift of more than the annual exclusion amount and lives at least three years past the date of this gift, the value of this gift is not taken into account in calculating a Minnesota estate tax liability. Gifting has been, and will continue to be, the means of minimizing Minnesota estate taxes.
- Hedge Against Federal Tax Law Changes. Under OBBBA, the federal estate tax exemption amount is stated to be permanent. 3 However, tax laws are subject to change. Wealthy taxpayers with a longer life expectancy may prefer to hedge their bets on the current tax rules by making gifts now to “lock in” the current federal estate tax exemption. This could be done through a combination of spousal lifetime access trusts, irrevocable trusts for children, or other gifting strategies.
- Family Legacy Reasons for Gifting. Our law firm has advised numerous of our clients on how to best transfer assets to their adult children or grandchildren to allow them to become homeowners. Similarly, many of our clients have made gifts for the educational or professional advancement of their children or grandchildren. Many of our clients see the non-tax benefits of “advancing” an inheritance to their children and grandchildren even during their lifetime. These family legacy benefits of lifetime transfers are “locked on” regardless of the future of the tax code.
I did not personally review all 1,018 pages of the OBBBA, as I enjoyed one big beautiful July 4th with my family. I hope you and your family likewise had the opportunity to enjoy the beautiful national holiday as well. Whether you or your clients have questions about the impact of the OBBBA on their personal estate planning matters, or other estate planning questions, I would be happy to help.
Cory
1 The federal unified credit will continue to be $13,990,000 per person in 2025, with portability of unused exemption to the surviving spouse.
2 The federal gift and estate tax exemption of a deceased spouse is “portable” to the surviving spouse. The federal gift and estate tax rate continues to be 40%. The federal generation-skipping transfer tax exemption is also set permanently at $15.0 million per person.
3 Under OBBBA, the federal estate and gift tax exemption and the generation-skipping transfer tax exemptions are indexed for inflation.
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