In this second installment of our multi-part series on the One Big Beautiful Bill Act (the “Act”), my colleague David Knutson and I discuss the changes made by the Act to the federal estate and gift tax regime.
Background
The federal government taxes wealth transfers in three ways:
- Estate tax is imposed on the value of estates at death;
- Gift tax is imposed on the value of gifts made during life; and
- Generation-skipping tax is imposed on the value of a bequest/gift made to a person two or more generations younger than the taxpayer.
No tax is due on the above wealth transfers until the value of the aggregate gifts/bequests exceeds an applicable exemption. This basic structure has been in place for decades. The exemption amounts and the tax rates, however, have changed over the years.