OBBBA Changes Reshape UHNW Estate and Business Tax Planning Strategies

The One Big Beautiful Bill Act (OBBBA) has introduced significant changes affecting estate and tax planning for ultra-high-net-worth (UHNW) individuals and privately-held business owners. Key modifications include the permanent increase in estate, gift, and generation-skipping transfer (GST) tax exemptions to $15 million per individual ($30 million per married couple) beginning in 2026, which offers greater predictability for wealth transfer strategies without urgency caused by previous sunset provisions. Despite the raised federal thresholds, state estate taxes remain a critical consideration where state exemptions are lower, necessitating detailed planning to manage multi-tier tax exposures. For UHNW families, advanced planning tools such as Grantor Retained Annuity Trusts (GRATs), Family Limited Partnerships (FLPs), sales to grantor trusts, Irrevocable Life Insurance Trusts (ILITs), and dynasty trusts continue to be integral for estate tax minimization and business succession strategies. Shifts in valuation methodologies were noted; valuation discounts commonly applied in family limited partnerships or qualified personal residence trusts may increase capital gains tax exposures for those beneath exemption thresholds by lowering the asset's cost basis. Tax professionals emphasize the need for ongoing oversight and risk management due to potential IRS challenges on asset valuations and the evolving legal landscape, including recent rulings like Connelly v. United States (2023) related to life insurance in buy-sell agreements. Defining value clauses have become standard drafting instruments to limit valuation disputes and tax liabilities. Life insurance remains relevant primarily as a tool for business succession funding and income replacement rather than estate tax liquidity given increased exemptions. Proper structuring of life insurance within corporate entities is essential to avoid unintended valuation inflation. For owners of private businesses, especially those considering or executing sales, the OBBBA's tax changes influence crucial wealth retention outcomes. Families with assets exceeding $250 million often establish private wealth management entities known as family offices, allowing higher customization, control, and privacy in managing complex estate and tax planning. Notably, adjustments to Qualified Small Business Stock (QSBS) provisions under OBBBA have implications for business sales and tax deferral strategies, warranting expert advice to navigate these updates effectively. The comprehensive nature of these reforms necessitates collaboration with tax, legal, and wealth management professionals to tailor strategies that align with current regulations, minimize tax burdens, and safeguard legacies amidst changing federal and state tax codes. These developments reflect a broader trend toward integrating sophisticated trust and transfer structures with evolving tax legislation to optimize multigenerational wealth preservation and business succession in a regulated environment.