To recap, and as explained in a detailed article on July 14 from Mohsen Ghazi, Patrick J McCurry, and Thomas P Ward of global law firm McDermott WIll & Emery, the Act covers:

-- Income tax and investment structuring and permanent extension of individual rates;

-- Expanded deduction for state and local taxes;

-- Enhanced pass-through deduction;

-- Enhanced Qualified Small Business Stock tax treatment;

-- Enhanced and expanded Opportunity Zones;

-- Restored 100 per cent bonus depreciation;

-- Enhanced interest expense deduction;

-- Immediate expense deduction for R&D costs; and 

-- Limits on excess business losses; and more. 

Estate and gift tax certainty
Perhaps most significant for wealth management clients in some ways, based on conversations FWR has had with advisors, are the provisions for estate and gift tax.

The federal estate and gift tax exemption will permanently increase to $15 million per individual , indexed for inflation beginning January 2026. 

There had been some speculation that the raise in estate and gift tax exemptions made in the 2017 Tax Cut and Jobs Act would sunset – creating a period of uncertainty that encouraged clients to seek advisors’ counsel. But with that out of the picture for the time being, it changes the advisory conversation, Gina Nelson, senior vice president at Chilton Trust, told FWR. 

“In 2021 there was a lot of uncertainty as to whether there would be significant changes to gift and estate tax laws, including whether the ability to establish grantor trusts would be eliminated,” Nelson said in an interview. “As a result, many clients did significant planning in 2021 in anticipation of changes that did not ultimately materialize. Due to the inflation adjustments to the estate and gift tax exemption amount since 2021, clients who have not done any planning since that time now have an additional $2.22 million of exemption available to them, or $4.58 million per married couple.”

Uncertainty encouraged some people to sit on the sidelines, Nelson said. “I have a lot of clients who have not done any planning since 2021.” 

As the McDermott Will & Emery authors said, the estate and gift tax move made multi-generational wealth transfer opportunities look more attractive, particularly through sophisticated trusts such as grantor retained annuity trusts, charitable lead annuity trusts, and dynasty trusts.

The OBBB ended – at least for the time being – fears that had surfaced under the Joe Biden administration that the US could embrace a wealth tax, or even tax unrealized capital gains. While FWR heard that such fears appeared overblown, concerns about wealth inequality – justified or otherwise – have fueled demands for such measures, particularly when public budgets are under strain in the US and much of the developed world.

Dawn Jinsky, a certified financial planner and partner in Plante Moran Wealth Management, told this publication how clients should respond to the estate and gift tax position as it now stands. 

"Whenever possible, use the generation-skipping exemption in tandem with the gift exemption to enable assets to grow free of gift, estate, and generation-skipping taxes. If the gift exemption is already used and avoiding gift tax is a priority, consider looking to existing irrevocable trusts that have already been funded during your lifetime. For example, if a client has exhausted their gift exemption but still has their generation-skipping transfer exemption available, we’ll look to leverage an irrevocable trust that was previously funded with closely held stock. In many cases, the trust permits division of the trust into exempt and non-exempt shares, which allows for a generation-skipping tax allocation to the exempt shares," Jinsky said in an emailed note. 

"One of the most widely utilized strategies for clients seeking to transfer assets outside of their taxable estate while retaining flexibility is the spousal lifetime access trust ," she continued. "For married individuals, this approach allows the creation of a trust for the benefit of the spouse, as well as potentially for children or grandchildren. The spouse may serve both as beneficiary and, if the trust is properly structured, as trustee. This arrangement enables the spouse to access funds within the trust for their health, maintenance, and support, as necessary. Additionally, the spouse may be granted a limited power of appointment, allowing for discretionary reallocation of trust assets among descendants, charitable organizations, or other parties as specified upon their passing." 

Dont forget inflation
With inflation proving to be more stubborn than perhaps the US public – and the Federal Reserve – would like, it is is a factor to consider.

"Inflation adjustments can be beneficial for individuals who use their exemption gradually rather than immediately, but using an exemption gradually can present its own set of challenges. In many cases, when the first spouse passes away, a family or credit shelter trust is funded with any unused exemption amount for the benefit of the surviving spouse. For clients who have already used their exemption amounts and subsequently receive annual increases, this could result in the creation of a smaller trust upon their passing – one that is required but not substantially impactful to the overall plan. It is advisable to ensure your crisis plan aligns with your gifting strategy to prevent the formation of an unintended minor trust," Jinsky said. "For clients with taxable estates, the increased exemption amount helps reduce exposure to the 40 per cent estate tax rate. When accumulated and applied effectively, such as to assets with leverage potential, this exemption can provide value within the estate plan."

Qualified Small Business Stock 
Chilton Trust's Nelson said the changes to Qualified Small Business Stock don’t alter the overall approach to this area .

Beforehand, the most amount of gain eligible for the QSBS exclusion was generally limited to $10 million, or 10 times the shareholder's tax basis in the relevant stock. As amended, that $10 million limit has been increased to $15 million, potentially giving shareholders a larger tax benefit. And, beginning in 2027, the $15 million amount will be adjusted annually for inflation. Also, the stock previously had to be held for five years to receive the exclusion, and under the new law the exclusion is tiered, beginning at 50 per cent after three years, 75 per cent after four years, and the full 100 per cent after five years, Nelson said. 

As this publication has noted before, the tax "tail" does not “wag the dog” of philanthropic life for many HNW individuals. “Many clients are not primarily motivated by tax implications,” Nelson said. “While the tax deduction is certainly a factor in their giving decisions, it is not usually the primary or deciding factor.”