What does the increased lifetime gift tax exemption mean for estate planning?
The lifetime gift tax exemption changed in 2025. Beginning on January 1, 2026, the federal estate and gift tax exemption is raised to $15 million per individual or $30 million for married couples.
Given that changing this threshold would require additional legislation, individuals and families planning a wealth transfer now have more clarity on what gift tax rules will look like for at least the next few years.
But do your transfer or estate plans maximize your benefits under the updated regulatory structure? Keep reading to learn more about the 2025 changes to gift tax exemption rules and what you should do next.
What is the lifetime gift tax exemption?
The lifetime gift tax exemption allows individuals or estates to transfer a certain amount of wealth to heirs or other beneficiaries without facing a federal tax liability. This long-standing element of tax law is used for estate planning or to facilitate lifetime gifts between different generations of a family.
Key forms of giving that can be shielded from tax liability under the lifetime gift tax exemption include:
- Cash.
- Gifts for holidays or special occasions.
- Interests in property.
- Down payments for homes.
- Life insurance premiums.
- 529 education plans.
This tool works best when deployed within the context of a thoughtful giving strategy or estate plan. Once you reach the limit, any additional giving becomes taxable, so you may want to prioritize how and when you use the gift exemption.
What are the rules for the lifetime gift tax exemption in 2025?
In 2025, estate and lifetime gift exemption rules changed to set a $15 million baseline starting in 2026. Unlike the previous increase in the exemption in 2017, this change is meant to be permanent, so individuals or families seeking to give money to heirs or beneficiaries tax-free can assume this is the standard moving forward.
- The $15 million individual or $30 million married couple exemption threshold is also indexed to inflation, with annual inflation adjustments beginning in 2027.
- The generation-skipping transfer (GST) tax exemption also aligns with the new estate and gift tax thresholds.
- The top federal estate, gift and GST tax rate remains at 40%.
- These changes were made as part of the One Big Beautiful Bill (OBBB) Act budget law that passed Congress in July, so any further changes to the gift exemption would require new legislation.
How the lifetime gift exemption impacts estate planning
Because the lifetime gift exemption limit was permanently increased in 2025, you have a valuable opportunity to transfer more wealth without triggering federal transfer taxes, whether during life or at death.
When updating or starting your estate plan, you can now benefit from:
- Accelerated lifetime gifting: Individuals can now gift up to $15 million without incurring federal gift tax, enabling more robust use of irrevocable trusts, family partnerships and other planning vehicles.
- Enhanced multigenerational planning: With the GST exemption also increased, it’s now more feasible to fund long-term trusts that benefit multiple generations.
- Strategic estate freezes: Techniques such as grantor retained annuity trusts (GRATs) and sales to intentionally defective grantor trusts (IDGTs) become even more useful when paired with the expanded exemption.
What are the next steps you should take to strengthen your estate planning?
The higher lifetime gift exemption presents an opportunity for individuals or estates looking to thoughtfully transfer wealth. However, careful estate planning remains essential to creating a strategy that delivers on your specific financial and personal goals as well as your long-term legacy.
Here are four important considerations for estate planning in 2025 and beyond that you should discuss with your tax and estate planning advisor:
1. Create or update your estate plan to reflect the new gift tax exemption
Although the increased lifetime gift exemption is permanent in the sense that it is not scheduled to sunset, tax law is not written in stone. Future legislation could change or even reduce current exemption limits.
That’s why you should act now to create or update your estate plan. For individuals without an existing estate plan, laying the groundwork sooner allows you to create a framework that can be adjusted over time.
Early action makes it easier to evolve your plan so that it stays aligned with life changes and your personal and financial objectives. It also allows you to transfer assets before they appreciate and implement long-range financial planning with greater precision and flexibility.
2. Review additional key elements of your existing plan
If you have an existing estate plan, consider that your life may have changed dramatically since the last time you reviewed it. When updating your plan to account for the higher gift tax exemption, you should also account for factors like:
- Changing family dynamics like marriages or births.
- Wealth increases.
- Shifts in personal goals or desired legacy.
- Adjustments based on medical or care needs.
3. Consider potential tax scenarios under state law
The increased exemption limit is for federal taxes only. Many states have their own estate tax rules with lower exemptions.
Be sure to consider applicable state tax law as a part of your estate planning to avoid unintended state-level tax consequences and reduce exposure.
Additionally, some states are community property states with their own peculiarities. This means that whenever you change your state residency, you may want to review your estate plan.
4. Be mindful of potential liabilities under income tax law
When assets are transferred, there are varying income tax impacts to the transferor as well as the transferee. Your estate plan should keep this factor in mind. Effective planning considers how to maximize the income tax benefits while accomplishing the transfer tax objectives.
How Wipfli can help
Wipfli’s personalized estate and gift planning services are designed to help preserve your financial legacy through proactive tax strategies and proven tools. Our experienced team provides comprehensive support, including valuation services, charitable giving optimization and multigenerational wealth planning, so you can better navigate uncertain tax environments.
Contact us today to learn how we can help you maximize exemptions with a plan tailored to your unique goals.
Explore our estate plan servicesYou can also find more estate planning tips with these additional resources:
