The Sunset Clock Has Stopped
For the better part of three years, estate planners and their UHNW clients operated under a hard deadline: use the elevated lifetime exemption before December 31, 2025, or watch it fall from roughly $14 million per person to approximately $7 million. The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently increased the lifetime gift, estate, and generation-skipping transfer exemptions that had been temporarily elevated under the Tax Cuts and Jobs Act of 2017.1 Beginning January 1, 2026, the federal exemption stands at $15 million per individual and $30 million for married couples, indexed annually for inflation — eliminating the TCJA's sunset entirely.1
Unlike the increase under the TCJA, the increase under the One Big Beautiful Bill Act is not subject to a sunset.2 The increased basic exclusion amount will not be decreased unless a future Congress and President enact and sign legislation to scale back or change it.3
The immediate planning implication is straightforward: the "use it or lose it" urgency is resolved. The strategic implication is more nuanced — and for families above $15 million in net worth, the exemption's permanence does not eliminate the planning imperative. It changes its shape.
What Hasn't Changed: The Mechanisms That Work at Every Exemption Level
The OBBBA did not modify the annual exclusion, direct tuition and medical payment rules, or 529 superfunding mechanics. These tools compound regardless of where the lifetime exemption sits.
Annual exclusion gifts. The IRS confirmed the annual gift tax exclusion at $19,000 per recipient in 2026, the same as in 2025 — and gifts within this amount do not use any portion of the donor's lifetime exemption.4 For married couples, the annual exclusion effectively doubles to $38,000 per recipient.5 A couple with four adult children and eight grandchildren can move $456,000 per year entirely outside the estate with no gift tax return required — no exemption consumed, no clock running. At scale, across a decade, that is a material transfer of wealth. The compounding effect on gifted assets that continue to appreciate outside the taxable estate is the point.
Direct tuition and medical payments. Federal law allows unlimited payments for qualified educational and medical expenses, provided payments are made directly to the educational institution or medical provider — and these payments do not count against the annual exclusion or lifetime exemption.6 This exclusion applies to tuition only, not room and board, books, or other fees — meaning a family could pay $50,000 of a grandchild's college tuition directly to the institution and still give another $19,000 tax-free under the annual exclusion in the same year.5 For multi-generational families running this strategy across several beneficiaries simultaneously, the aggregate transfer can be substantial.
529 superfunding. A powerful planning strategy for education is the ability to "superfund" a 529 plan by contributing five years of annual exclusion gifts at once — currently up to $95,000 per beneficiary.7 The tradeoff: the donor cannot make additional annual-exclusion gifts to the same beneficiary during the five-year period without triggering gift tax reporting. The mechanism works because assets inside a 529 grow free of federal income tax and distribute tax-free for qualified education expenses — front-loading the account maximizes the time those assets compound outside both the donor's estate and the income tax system.
What the Permanence Actually Changes
The disappearance of the sunset removes one specific pressure: the need to accelerate large lifetime gifts to lock in a higher exemption before it fell. The permanent increase eliminates the year-end cliff that previously encouraged large lifetime gifts.1 That removes a source of planning distortion — families no longer need to gift earlier than their liquidity situation or family dynamics warrant just to preserve exemption capacity.
What permanence does not change: the 40% federal transfer tax rate on estates above the exemption. A taxpayer's estate is subject to a 40% tax to the extent it exceeds the basic exclusion amount.8 For families whose estates are projected to grow well above $15 million — or $30 million for couples — the case for lifetime gifting strategies, trust structures, and systematic use of the annual exclusion remains intact. Many high-net-worth individuals may still benefit from making strategic gifts now to lock in asset growth outside their estates.1
The other shift worth noting: trusts drafted with the TCJA sunset in mind may reference outdated language or structures, and those documents warrant a review under the new rules.9 Families that made large defensive gifts in 2024 or early 2025 specifically to beat the anticipated sunset should confirm with counsel that those transfers remain optimally structured given the current exemption landscape.
The mechanics — annual exclusions, direct payments, superfunding — have always worked independently of where the lifetime exemption sits. The OBBBA's permanence removes a distorting deadline. The fundamentals of systematic wealth transfer remain unchanged.