Gavin Howe
Former US President Donald Trump has proposed changes to inheritance tax laws as part of his planned overhaul of general tax policies. Trump's One, Big, Beautiful Bill, passed by the US House of Representatives in May 2025, seeks to extend the Tax Cuts and Jobs Act's (TCJA) estate tax provisions beyond 2025 and increase the estate tax exemption. If approved by the Senate and signed into law, the bill would increase the exemption limit to $15 million per individual for 2026, up from $13.99 million in 2025. However, it's important to note that the estate tax only applies to estates worth more than $13.99 million, affecting only the wealthiest 0.1% of Americans. While the proposed changes to inheritance tax laws have potential implications for wealth preservation and tax liabilities, it remains to be seen if they will be fully enacted.
| Characteristics | Values |
|---|---|
| Inheritance tax rate | 18% |
| Estate tax rate | 40% |
| Capital gains tax rate | 20% |
| Trump's proposal | Potential repeal of the federal estate tax |
| Impact | May not impact most Americans, but changes to capital gains tax treatment could affect everyday families |
| TCJA | Sunset expected by the end of 2025 |
| Trump's bill | Passed by the House, awaiting approval by the Senate |
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What You'll Learn
Trump's proposed changes to inheritance tax laws
Former US President Donald Trump has supported making permanent changes to inheritance tax laws, primarily through the Tax Cuts and Jobs Act (TCJA) enacted in 2017. The TCJA increased the estate tax exemption from $5.49 million per individual in 2017 to $11.18 million in 2018, with the amount adjusted for inflation to $13.99 million per person in 2025.
Trump's "One, Big, Beautiful Bill," passed by the US House of Representatives on May 22, 2025, aims to extend the TCJA's estate tax provisions beyond 2025. If approved by the Senate and signed into law, the bill would increase the estate tax exemption to $15 million per individual for 2026, the highest amount ever. The federal estate tax rate would remain at 40%, and the generation-skipping tax (GST) exemption would align with the increased estate tax exemption.
Trump's proposals have been criticised by some as encouraging dynastic wealth hoarding and further weakening the estate tax. The potential repeal of the federal estate tax and the elimination of the step-up in basis could have significant implications for heirs. Under the proposed changes, heirs would inherit assets at their original purchase price, resulting in capital gains tax liabilities on the entire appreciation when they sell. This could particularly affect middle-class families who inherit homes, small businesses, or stock portfolios.
While the repeal of the estate tax may only directly benefit the wealthiest 0.1% of Americans, the proposed changes to capital gains tax treatment could have broader consequences. The elimination of the step-up in basis would result in more people paying taxes on inherited wealth, potentially reshaping how families plan for passing down their assets.
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The potential repeal of the federal estate tax
Trump's proposed changes, outlined in his "One, Big, Beautiful Bill," aimed to further increase this exemption to $15 million per individual for 2026, which would be an all-time high. The bill was passed by the House of Representatives in May 2025 and awaited Senate approval. However, it's important to note that the federal estate tax currently only applies to estates worth more than $13.99 million, impacting only the wealthiest 0.1% of Americans.
If the step-up in basis is eliminated, heirs could face significant capital gains tax liabilities when they sell inherited assets. This change could affect middle-class families who inherit homes, small businesses, or stock portfolios, as they may owe capital gains tax on the entire appreciation of the assets when sold. Consequently, it is recommended that individuals review their estate plans, understand how their assets could be affected, and explore tax-smart strategies to protect their family's financial future.
While the potential repeal of the federal estate tax may not directly impact most Americans, the accompanying changes to capital gains tax treatment could have far-reaching consequences for everyday families.
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Capital gains tax treatment and its impact on inherited wealth
While former US President Donald Trump did not put a law in place about inheritance tax, he did oversee the Tax Cuts and Jobs Act of 2017 (TCJA) which increased the estate tax exemption from $5.49 million per individual in 2017 to $11.18 million in 2018. This amount, adjusted for inflation, in 2025 is $13.99 million per person.
Trump's "One, Big, Beautiful Bill", passed by the House of Representatives in May 2025, seeks to extend the TCJA's estate tax provisions beyond 2025 and increase the exemption even more. If passed, the new exemption will rise to $15 million per individual for 2026.
One of the biggest headlines from Trump's proposal is the potential repeal of the federal estate tax. However, this only applies to estates worth more than $13.99 million, so it won't directly impact most Americans. Instead, changes to capital gains tax treatment could have major consequences for everyday families.
Capital gains tax applies when you sell something for more than you originally paid. When you inherit assets, the cost basis often resets to the asset's value on the date of death. This "step-up" in basis effectively removes the immediate capital gain, which is beneficial for inheritors. However, under Trump's proposed changes, this could be eliminated. Instead, heirs would inherit assets at their original purchase price, meaning they would owe capital gains tax on the entire appreciation when they sell. For example, if you inherited a $500,000 home but had to use the original $100,000 purchase price as the basis, you could be taxed on $400,000 in gains when you sell.
This change could have a significant impact on families passing down real estate, stocks, or small businesses, as it would saddle heirs with substantial tax liabilities. While the proposal doesn't outline new tax brackets, the elimination of the step-up in basis means more families would be liable for capital gains taxes when selling inherited assets.
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The sunset of the Tax Cuts and Jobs Act of 2017 (TCJA)
The Tax Cuts and Jobs Act (TCJA) was enacted in 2017 by President Trump. It made substantial changes to tax rates and the tax base for individual income tax. The TCJA reduced statutory tax rates at almost all levels of taxable income and shifted the thresholds for several income tax brackets. It also doubled the maximum per-child credit amount from $1,000 to $2,000 starting in 2018.
However, the TCJA was initially set to expire in 2025, with individual and pass-through tax cuts expiring after ten years while corporate tax cuts would be permanent. This expiration date was known as the sunset of the TCJA.
In 2025, Congress passed the One Big Beautiful Bill Act, which extended most provisions of the TCJA beyond their original expiration dates. This bill was passed by the House of Representatives in May and later signed into law, impacting the future of estate planning. The new exemption will rise to $15 million per individual for 2026, an all-time high.
Despite the passage of this bill, the sunset of the TCJA remains a concern for individuals and their advisors with regard to tax planning. While former President Trump has supported making the estate tax changes under the TCJA permanent, his return to the White House does not guarantee that the sunset will not occur.
To mitigate the risk of the sunset, clients seeking to maintain flexibility as the deadline approaches may consider getting their planning and necessary documents ready now and then waiting to make transfers of property until closer to the end of 2025, when the fate of the TCJA is more certain.
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Trump's One, Big, Beautiful Bill and its impact on estate planning
On May 22, 2025, the U.S. House of Representatives passed President Trump's One, Big, Beautiful Bill, which now awaits approval by the Senate. The bill proposes to extend the Tax Cuts and Jobs Act's (TCJA) estate tax provisions beyond 2025.
The TCJA, enacted in 2017, increased the estate tax exemption from $5.49 million per individual in 2017 to $11.18 million in 2018. This amount, adjusted for inflation, is $13.99 million per person in 2025. Trump's bill seeks to increase this exemption even further, to $15 million per individual for 2026, which would be an all-time high.
The bill's potential impact on estate planning is significant. Firstly, it could provide a permanent break for those subject to the estate tax, as the current exemption rates are set to expire by the end of 2025. Secondly, it could reshape how families think about passing down their assets. While the repeal of the federal estate tax would primarily benefit the wealthiest 0.1% of Americans, changes to capital gains tax treatment could affect many more families.
The potential elimination of the step-up in basis means that more people would pay taxes on inherited wealth. Instead of inheriting assets at their current market value, heirs would inherit them at their original purchase price, owing capital gains tax on the entire appreciation when they sell. This change could have a significant impact on families passing down real estate, stocks, or small businesses, who may unintentionally saddle their heirs with substantial tax liabilities.
To prepare for these potential changes, individuals should review their estate plans, understand how their assets could be affected, and explore tax-smart strategies to protect their family's financial future. Gifting assets now, while exemption rates are high, may be advisable to remove future appreciation from the taxable estate. Additionally, seeking professional advice can help individuals navigate the complexities of state and federal estate tax regimes.
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Frequently asked questions
No, but he did propose changes to inheritance tax laws. Trump's "One, Big, Beautiful Bill" was passed by the House of Representatives in May 2025 and is currently awaiting approval by the Senate.
The bill seeks to extend the Tax Cuts and Jobs Act's (TCJA) estate tax provisions beyond 2025 and increase the estate tax exemption.
As of 2025, estates worth \$13.99 million or more are subject to federal estate taxes.
If the bill is passed and signed into law, the new exemption will rise to \$15 million per individual for 2026, an all-time high.
