The One Big Beautiful Bill Act, signed into law on July 4, 2025, brings sweeping changes to federal estate and gift tax provisions that will impact Pennsylvania families starting in 2026. These modifications represent the most substantial estate tax reforms in decades, permanently raising exemption amounts and creating new opportunities for multigenerational wealth transfers.
Our Pennsylvania estate planning lawyer can help families throughout the Keystone State understand how these federal changes affect their existing estate plans. The new legislation requires careful review of current strategies to maximize benefits while addressing potential complications.
Major Tax Changes Taking Effect in 2026
The One Big Beautiful Bill Act establishes dramatically higher federal gift and estate tax exemptions beginning January 1, 2026.
Federal Gift and Estate Tax Exemptions
Starting in 2026, the federal gift and estate tax exemption will permanently increase to $15 million per individual and $30 million for married couples, indexed for inflation going forward. This increases from the current 2025 exemption of $13.99 million per person and eliminates uncertainty surrounding sunset provisions that would have reduced exemptions to approximately half their current levels.
The higher exemptions give families more certainty when planning for the future. Unless Congress makes further changes, families can map out long-term strategies with confidence, which makes it easier to handle wealth transfers and pass businesses down to the next generation.
Generation-Skipping Transfer Tax Alignment
The Generation-Skipping Transfer (GST) tax exemption now matches the increased estate tax exemption. With both exemptions at $15 million per person, a grandfather in Philadelphia can transfer substantial assets directly to his grandchildren without worrying about mismatched tax rules.
Annual Gift Tax Exclusion
Families can still make annual gifts of $19,000 per recipient in 2025 without affecting their lifetime exemption amounts. Even modest annual gifts to multiple family members add up to meaningful wealth transfers over time.
Suppose Juan and Sofia Martinez from Montgomery County have three adult children and six grandchildren. Juan and Sofia can gift $19,000 to each of their nine family members every year ($171,000 total per spouse, or $342,000 combined) without using any lifetime exemption amounts.
Strategic Opportunities for Pennsylvania Families
The expanded exemptions create new planning possibilities while requiring consideration of state-specific factors.
Business Succession Planning
Family business owners stand to gain the most from these changes. Take, for example, a Lancaster County family with a $20 million distribution company. In the past, passing the business to the next generation would have required complicated, multi-year gifting strategies. With the new $30 million exemption available to married couples, the entire business could be transferred in one step, streamlining succession.
Dynasty Trust Structures
The matching exemption amounts also open the door to long-lasting trust structures. Couples can now move up to $15 million each into generation-skipping or dynasty trusts, securing substantial resources for future heirs while keeping growth in value outside of taxable estates.
Charitable Planning Adjustments
The increased exemptions may reduce the relative tax benefits of certain charitable strategies. However, charitable remainder trusts and charitable lead trusts may still provide valuable income tax benefits while helping families achieve philanthropic goals.
Pennsylvania State Tax Considerations
Pennsylvania imposes inheritance tax rates from 0% to 15%, depending on the beneficiary's relationship to the deceased. These state taxes continue to apply regardless of federal changes, requiring coordination between federal and state planning strategies.
Charitable bequests remain completely exempt from the Pennsylvania inheritance tax. The expanded federal exemptions may encourage larger charitable gifts since families have more flexibility in overall wealth transfer plans.
Reviewing and Updating Existing Plans
Current estate plans require a thorough review to capitalize on new opportunities and address potential issues arising from the changed tax environment.
Trust Document Revisions
Many existing trusts include language that seemed reasonable when drafted but may now backfire. Take a trust created in 2020 that directs "assets up to the federal estate tax exemption" to go to children, with anything above that amount going to charity. When that trust was written, the exemption was around $11.7 million. Starting in 2026, the same language would direct $15 million to the children instead.
Implementation Timeline
Families have until January 1, 2026, to review their strategies. Since exemptions are going up rather than down, there's less pressure to accelerate gifts before the deadline. However, other factors matter too. A family business might be worth less today than it will be in two years, making 2025 an attractive time to transfer ownership interests. Real estate values, stock prices, and interest rates all affect the timing of wealth transfer strategies.
Dissecting the One Big Beautiful Bill Act for Estate Planning
The One Big Beautiful Bill Act represents a significant shift in estate planning possibilities for Pennsylvania families. These changes require careful analysis of existing plans and strategic implementation of new opportunities.
Regular coordination with tax advisors, financial planners, and Pennsylvania estate planning attorneys remains vital to address the interplay between federal changes and state law requirements. The new law's permanent baseline doesn't eliminate the need for regular plan reviews as family circumstances and business values continue to evolve.
Working with experienced Pennsylvania estate planning lawyers helps families adapt their wealth transfer strategies to maximize the benefits of this expanded federal framework while addressing state-specific considerations that remain important factors in comprehensive estate planning.