The estate planning landscape for high-net-worth individuals (HNWIs) has shifted dramatically in 2025, thanks to sweeping federal reforms and evolving Arizona statutes. For those with significant assets, now is the time to reassess your estate and asset protection strategies to ensure they align with the new legal and tax environment.
Federal Changes: The One Big Beautiful Bill Act (OBBBA)
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA), a comprehensive tax reform package that permanently extends and expands many provisions of the 2017 Tax Cuts and Jobs Act (TCJA). For HNWIs, the implications are substantial:
- Estate and Gift Tax Exemption Increased
The unified federal estate and lifetime gift tax exemption has been raised to $15 million per individual (or $30 million for married couples), indexed for inflation starting in 2026. This is a significant increase from the anticipated drop to around $7 million per person had the TCJA provisions expired. Note: a change in administration or in congressional majority could impact this situation. - Generation-Skipping Transfer (GST) Tax Alignment
The GST tax exemption now mirrors the $15 million threshold, enabling more robust multi-generational wealth transfers through dynasty trusts and other vehicles. - Trust Income Tax Brackets Made Permanent
The OBBBA locks in the TCJA-era tax brackets for trusts and estates, with annual inflation adjustments. This provides long-term predictability for trustees managing irrevocable trusts. - QSBS Expansion
The Qualified Small Business Stock (QSBS) exclusion has been broadened, offering enhanced capital gains tax relief for investments in qualifying businesses acquired after July 4, 2025. - Charitable Deduction Limitations
High-income earners will now face new limitations on itemized and charitable deductions, with a cap on the benefit of itemized deductions at 35% for those in the top tax bracket.
Arizona-Specific Considerations
While Arizona does not impose a state estate or inheritance tax, local considerations remain critical:
- Community Property Rules: Arizona’s community property laws can significantly impact estate planning for married couples. Proper titling of assets and use of community property agreements can offer a full step-up in basis at the death of the first spouse, reducing capital gains exposure for surviving spouses and heirs.
- Asset Protection: Asset Protection continues to be a focus among Arizona high net worth individuals. We can assist with tools such as irrevocable trusts and other asset protection strategies to shield assets from future creditors while retaining some beneficial interest.
- Real Estate and Business Holdings: With Arizona’s booming real estate market and influx of business investment, it’s essential to structure ownership through LLCs or limited partnerships to manage liability and facilitate smoother generational transfers.
Strategic Planning Opportunities
Given the permanence of the elevated federal exemptions, HNWIs should consider:
- Accelerated Gifting: Use the $15 million exemption to make large lifetime gifts to irrevocable trusts, removing appreciating assets from your taxable estate.
- Dynasty Trusts: Leverage the GST exemption to establish long-term trusts that benefit multiple generations without incurring additional transfer taxes.
- Charitable Planning: Despite new deduction limitations, charitable remainder trusts (CRTs) and donor-advised funds (DAFs) remain powerful tools for philanthropic goals and tax efficiency.
- Review of Existing Plans: Many estate plans drafted under the assumption of a 2026 sunset may now be outdated. A comprehensive review is essential to take advantage of the new tax environment, with a focus on basis and capital gains tax planning.
Final Thoughts
The OBBBA has created a more stable and generous environment for estate planning, but it also introduces new complexities. For Arizona residents with substantial wealth, the interplay between federal reforms and state-specific rules demands a proactive, customized approach.
At Davis Miles, we’re here to help you navigate these changes with confidence. Whether you’re looking to preserve wealth, protect your legacy, or plan for future generations, now is the time to act.
Contact us today to schedule a consultation with our estate planning team.