Congress passed the One Big Beautiful Bill Act on July 4, 2025, changing how federal estate taxes work for families across the country. Starting in 2026, individuals can pass $15 million to their heirs without federal estate tax, while married couples get $30 million in combined exemptions, a jump from today's $13.99 million per person.
For people planning their estates, these changes create significant new opportunities to preserve wealth for future generations. A skilled Central Kentucky estate planning lawyer can help families understand how the increased federal exemptions affect their specific situations, especially since Kentucky doesn't impose its own estate tax.
What Are the New Federal Estate Tax Exemption Amounts?
Beginning January 1, 2026, the federal estate and gift tax exemptions will increase to $15 million per individual. Married couples can shield up to $30 million from federal estate taxes through proper planning. These amounts will adjust annually for inflation.
Generation-Skipping Transfer Tax
The legislation also aligns the Generation-Skipping Transfer (GST) tax exemption with the new estate tax amounts. Wealthy families can now transfer $15 million per person directly to grandchildren without triggering the 40% GST tax.
How Do These Changes Affect Kentucky Estate Planning?
Kentucky's tax structure creates specific advantages under the new federal law. The state imposes an inheritance tax but no estate tax, so these federal changes don't conflict with existing state obligations.
Inheritance Tax Considerations
Under Kentucky Revised Statute 140.070, close family members don't pay inheritance tax when someone dies. This includes spouses, children, grandchildren, parents, and siblings. But if you leave money to nieces, nephews, friends, or charities, they'll owe between 4% and 16% in Kentucky inheritance tax based on how much they inherit and their relationship to you.
The higher federal exemptions won't change what Kentucky collects in inheritance tax, but they do open doors for families to give away more money during their lifetimes. In turn, this can help reduce what non-family beneficiaries will owe later.
Strategic Planning Opportunities
Take the fictional Martinez family from Bardstown, who own a bourbon distillery valued at $25 million. Under current federal exemptions, passing the business to their children would trigger significant federal estate taxes. Starting in 2026, they can transfer the entire business tax-free at the federal level.
What Are the Current Annual Gift Tax Rules?
The Act maintains the annual gift tax exclusion at $19,000 per recipient for 2025, with future inflation adjustments. This exclusion works independently of the lifetime exemption, providing additional tax-free wealth transfer opportunities.
A married Central Kentucky couple can give $38,000 annually to each child or grandchild without using their lifetime exemption. A hypothetical couple with four children and eight grandchildren can transfer $456,000 annually without federal tax implications.
How Should Central Kentucky Families Update Their Estate Plans?
The permanent increase in federal exemptions under the One Big Beautiful Bill Act creates opportunities to revise existing plans and implement new strategies that weren't previously viable.
Reviewing Existing Trust Structures
Families with revocable living trusts designed around lower exemption amounts should review these structures. Imagine a Radcliff family established a generation-skipping trust using the 2020 exemption of $11.7 million. Starting in 2026, they can potentially add another $3.3 million to the trust without triggering transfer taxes.
Implementing New Gifting Strategies
Higher exemptions allow more aggressive gifting strategies, particularly for appreciating assets. A Central Kentucky horse farm owner could gift $15 million worth of farmland starting in 2026, removing current value and future appreciation from his taxable estate.
What Additional Tax Benefits Does the Act Provide?
Beyond estate tax changes, the One Big Beautiful Bill Act includes provisions benefiting Kentucky seniors and families engaged in estate planning.
Senior Tax Relief Provisions
Approximately 90% of Social Security beneficiaries will be exempt from federal income taxes on their benefits. Seniors aged 65 and older with incomes under $75,000 receive a $6,000 tax deduction, while married couples earning under $150,000 receive $12,000. These provisions increase after-tax income for seniors, potentially freeing up more wealth for transfer to the next generation.
Trump Accounts for Family Wealth Transfer
The new law also creates special savings accounts called "Trump Accounts" where parents can set aside up to $5,000 each year for their children or grandchildren. The money grows without being taxed, and it comes out of the parents' estate for tax purposes. A couple with six grandchildren could put away $30,000 total each year across all the accounts.
Should Central Kentucky Families Take Action Now?
The permanent nature of the One Big Beautiful Bill Act's estate tax provisions provides long-term planning certainty. However, families should evaluate opportunities before the effective date of January 1, 2026.
Estate planning strategies that weren't previously feasible due to lower exemption limits may now make financial sense. Families should work with experienced Central Kentucky attorneys to review and update current estate plans and identify opportunities to maximize these benefits.
The legislation's combination of increased exemptions, senior tax relief, and new planning tools creates a favorable environment for wealth preservation. Kentucky families who act thoughtfully can position themselves to maximize these benefits while protecting their legacies for future generations.