How One Family Turned a Major Tax Law Change Into a Better Legacy Strategy

When Todd first heard about the “One Big, Beautiful Bill,” he figured it was just another piece of legislation that wouldn’t touch him.

He owned a closely held manufacturing company, several rental properties, a diversified investment portfolio, and he and his wife had two grown children. Their estate plan had been drafted five years ago — before the recent tax headlines — and Todd was proud of how “solid” it was.

Then he asked a trusted advisor one question:

That’s when things changed.

What Really Changed in the New Tax Law

While much of the media focused on flashy headlines, the One Big Beautiful Bill Act (OBBBA) enacted in 2025 introduced several legally substantive changes that matter deeply to estate planning.

1. A Permanent, Higher Federal Estate & Gift Tax Exemption

Previously, under the Tax Cuts and Jobs Act (TCJA), the federal estate, gift, and generation-skipping transfer (GST) tax exemptions — which had climbed to nearly $14 million — were scheduled to sunset after 2025, potentially dropping back near historical lows.

Under the new law:

• The federal exemption rises to $15 million per individual and $30 million for a married couple starting January 1, 2026.

• This exemption is now indexed for inflation and made permanent, removing the looming “use it or lose it” deadline.

That sounds good — and in many cases it is — but legal risks remain, especially for business-owning families.

2. No Change to Step-Up in Basis Rules

Despite the tax law overhaul, the familiar stepped-up basis rule at death — where heirs generally receive inherited assets at fair market value for tax purposes — remains intact.
This is critical for families with highly appreciated assets like company stock and real estate.

3. Estate Tax Still Applies Above the Threshold

Although the exemption is higher and permanent, the estate tax rate itself did not go away — the tax is still applied at up to 40% on amounts over the exemption.

That means large estates still face significant federal estate tax unless structurally planned.

4. No New Restrictions on Trust Structures

Common planning vehicles — such as grantor trusts, spousal lifetime access trusts (SLATs), and other irrevocable vehicles — were not prohibited or restricted under the new law, though their use must be carefully aligned with strategy.

Where Todd’s Old Plan Fell Short

Todd and his wife had a well-drafted revocable trust and modest gifting strategy. But the new law changes the context in which those tools operate — especially for business owners with complex holdings.

Here’s what we uncovered:

A. Estate Valuation Risk on a Closely Held Business

Even with a $30M spousal exemption, valuation matters. Without proper valuation discounts or entity structuring, the IRS may attribute full value to closely held business interests — pushing a family over the estate tax exemption even if net worth seems below it on paper.

This is where entity design, buy-sell agreements, and valuation methodology become legal tools — not just tax tools.

B. Rental Properties Held Personally Create Unnecessary Exposure

Todd’s rental real estate was titled personally and through an LLC — but without the right liability protections. If a tenant lawsuit hit one property, it could jeopardize the entire estate before his plan even goes into effect.

Good estate planning isn’t just about taxes — it’s about risk isolation.

C. A Trust That Didn’t Anticipate Future Changes

His old revocable trust directed assets to his children at death, but didn’t address:

• Control if one child works in the business and the other doesn’t

• Asset protection from ex-spouses, lawsuits, or creditor claims

• The impact of the new estate tax exemption after gifting decisions had already been made

A trust can’t just name beneficiaries — it must prescribe outcomes.

How We Re-Engineered Their Plan

Here’s what we did next, legally and structurally:

1. Re-Optimized Entity Structures

We reviewed how the business and rental properties were held to ensure appropriate legal separation and potential valuation discounts for estate tax purposes.

2. Updated Trusts With Modern Protective Language

Revocable trusts were moved where appropriate into irrevocable and protective sub-trusts that:

• Protect assets from creditors and divorces

• Give clear guidance on who controls what

• Ensure a smooth, non-disruptive transition of business control

3. Took Advantage of the Higher Exemption — Without Over-Gifting

Rather than rushing large lifetime gifts out of fear of sunsets (no longer required), we built a phased gifting strategy that works with the permanent exemption, preserving flexibility and control.

The Real Lesson for Closely Held Business Owners

The new “Big, Beautiful” law didn’t remove estate tax — and it didn’t eliminate the need for legal precision.

What it did do is create room to plan thoughtfully instead of frantically. But with that room comes responsibility:

• To ensure accurate valuation of business and real estate interests

• To use trusts not just as containers, but as legal outcome machines

• To coordinate gifting, control rights, and protections across generations

Legacy Is Not a Numbers Game — It’s a Legal Design Problem

If your estate plan hasn’t been reviewed since before the OBBBA changes — especially if you own a business, rentals, or significant investments — there’s no better time than now to stress-test it against the current legal environment.

At BarthCalderon, we help business-owning families turn tax law into sound legal strategy — not just good intentions.

Your assets are valuable — but your plan should be legally bulletproof.