Creating an estate plan involves much more than preparing a Will or organizing a few important papers. A thorough plan provides protection for your assets, financial security for loved ones, and a way to carry out your long-term goals, whether personal, business-related, or charitable. For families with substantial wealth, understanding how federal and state tax rules interact is a critical part of effective planning. The passage of the One Big Beautiful Bill Act (OBBBA) in 2025 introduced sweeping revisions to federal estate and gift tax laws, offering both new advantages and potential challenges. To help explain how these changes may influence your estate plan, the attorneys at Wilcox Attorneys, PA discuss how OBBBA impacts estate planning in Arkansas.
Federal Gift and Estate Tax Overview
The federal government taxes certain transfers of wealth, including large gifts made during your lifetime along with the value of assets passed down at death. Before heirs can receive property, the estate must resolve any outstanding federal estate or gift tax obligations. While Arkansas does not currently levy a state-level estate or inheritance tax, residents must still comply with federal transfer tax rules. These federal taxes can take a significant portion of a large estate if proactive planning is not completed in advance. At present, the top federal estate and gift tax rate is 40 percent. This means that without available exemptions or deductions, a taxable estate could see nearly half of its value diminished by federal taxes.
The Lifetime Exemption Before OBBBA
One of the primary ways individuals reduce or eliminate estate and gift tax liability is through the lifetime exemption which shields a specific amount of wealth from taxation during life and at death. Prior to OBBBA, the exemption amount was $13.99 million per individual in 2025, or nearly $28 million for a married couple. These historically high limits, originally established by the 2017 Tax Cuts and Jobs Act, allowed significant wealth transfers to occur without triggering federal taxes. Under pre-OBBBA law, the exemption was scheduled to “sunset” at the end of 2025, dropping to roughly $5 million per person in 2026 (adjusted for inflation). This reduction caused many families to accelerate gifting programs, establish irrevocable trusts, or restructure ownership of assets before the lower exemption took effect.
Major Provisions Introduced by OBBBA
Enacted on July 4, 2025, OBBBA permanently reshaped the federal transfer tax framework. The legislation extended the higher exemption levels originally established in 2017 and introduced a new base year for calculating inflation adjustments. Beginning in 2026, the lifetime exemption increases to $15 million for each taxpayer. Married couples who plan properly may shelter a combined $30 million from federal estate and gift taxes. This increase provides valuable opportunities for additional tax-free transfers. Those who previously used their entire exemption under the old limits now have renewed flexibility to shift more wealth out of their taxable estates. Families can take advantage of this by making lifetime gifts to children, funding dynasty trusts, or transferring ownership interests in family businesses before appreciation raises asset values further.
OBBBA retains “portability,” a provision that allows a surviving spouse to use the unused portion of a deceased spouse’s federal exemption. For example, if one spouse used $5 million of their $13.99 million exemption before passing away in 2025, the surviving spouse could add the remaining $8.99 million to their own exemption. When the exemption rises to $15 million in 2026, the survivor could potentially protect $25 million from federal taxation.
Why Federal Estate Tax Planning Still Matters
Even though OBBBA appears to lock in favorable exemption levels, future legislation can always modify tax thresholds or rates. For this reason, individuals and families should take advantage of the current $15 million exemption while it remains available. Advanced planning tools such as Spousal Lifetime Access Trusts (SLATs), Grantor Retained Annuity Trusts (GRATs), Charitable Remainder Trusts (CRTs), and Irrevocable Life Insurance Trusts (ILITs) can all help transfer wealth efficiently while minimizing potential tax burdens. These structures not only reduce taxable estates but also provide liquidity to cover estate taxes, ensure asset protection, and maintain financial flexibility for surviving spouses. Working with an experienced Arkansas estate planning attorney can help determine which strategy best fits your goals and risk tolerance.
Can We Help You Incorporate the OBBBA into Your Arkansas Estate Plan?
For additional information, please sign up for one of our FREE estate planning seminars. If you would like assistance incorporating the OBBBA into your Arkansas estate plan, contact the experienced Washington County, Fayetteville, Springdale, Rogers, Bentonville, and Northwest Arkansas estate planning attorneys at Wilcox Attorneys, PA by calling 479-443-0062 to schedule your appointment today.
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