This article is educational only and isn’t personalized legal, tax, or investment advice. Talk to your estate planning attorney and tax advisor before changing anything based on what you read here.
In 2024, a lot of wealthy families did the exact same thing at the exact same time. They boarded up the windows.
The storm had a name: the estate tax sunset. The federal exemption was supposed to fall off a cliff on January 1, 2026, dropping from $13.99 million per person to roughly $7 million. Advisors and attorneys spent two years telling clients to use it or lose it. Families gifted early. Irrevocable trusts got funded in a hurry. SLATs got drafted at a pace that would make a title company blush.
Then the storm changed course.
The One Big Beautiful Bill Act (OBBBA) passed on July 4, 2025, and instead of cutting the exemption in half, it did the opposite. Permanently.
Here’s the swing, side by side:
| What Everyone Planned For | What Actually Happened (2026) | |
|---|---|---|
| Individual exemption | ~$7 million (projected sunset) | $15 million |
| Married couple, with portability | ~$14 million | $30 million |
| Sunset provision | Built in, automatic | None. It’s permanent. |
| Future adjustments | N/A | Indexed for inflation starting 2027 |
That’s good news for almost everyone. But if your family is one of the ones that boarded up the windows before the storm ever hit, some of that plywood might now be nailed over your own exits.
Why “Beating the Sunset” Can Backfire
Here’s the part that doesn’t make headlines.
A lot of the irrevocable trusts and gifting strategies built between 2023 and 2025 were designed around a single goal: lock in the old exemption before it vanished. That made complete sense at the time. It doesn’t automatically make sense now, and nobody sends you a memo when your old strategy quietly stops fitting your life.
Two problems keep showing up when we review these older plans.
Bypass trusts and formula clauses: Plenty of older wills and revocable trusts include language that funds a “bypass trust” or “credit shelter trust” up to the full exemption amount, whatever that happens to be at death. In 2020, that clause might have pointed roughly $11.7 million into an irrevocable trust. Under 2026 numbers, that same sentence could try to push $15 million or more into that trust instead of to a surviving spouse. That’s not a rounding error. That’s a different plan entirely, and your documents don’t know the difference.
A lost step-up in basis: Assets that stay in a surviving spouse’s own name generally get a full step-up in basis at the second death, which wipes out a lot of capital gains exposure. Assets locked inside certain bypass trusts don’t always get that same treatment. If your estate now sits comfortably under $15 million, or $30 million as a couple, a structure built to dodge an estate tax bill might be quietly costing your family a basis step-up you never actually needed to give up.
Neither of these is a reason to panic. It’s a reason to look.
If You Own the Business, There’s a Third Layer of Plywood
Most of what we’ve covered so far applies to any high net worth family. But estate planning for business owners adds an extra dimension: the buy-sell agreement.
Buy-sell agreements are usually funded and valued based on assumptions locked in years ago, often around the same time your estate documents were drafted to beat the old sunset. That creates two separate blind spots.
Funding built for the wrong number: Life insurance funding a buy-sell agreement is frequently sized around a specific liquidity need, covering an estimated estate tax bill, a valuation set at a point in time, or a formula tied directly to the exemption. If your buy-sell was funded to cover a tax bill assuming a $7 million exemption, and the OBBBA estate tax exemption now sits at $15 million, that funding level may no longer match the problem it was built to solve.
Ownership interests routed through the same formula clauses: Cross-purchase and entity redemption agreements both interact with how ownership actually transfers at death. If your business interest is one of the assets a stale formula clause is routing into a bypass trust 2026 “up to the exemption amount,” you could end up with a trust, rather than your co-owners or your family, holding a meaningful stake and a say in how the business runs. This also matters for the step up in basis trust question; if your business interest ends up inside a bypass trust, the basis treatment at the second death could be less favorable than if it passed directly to your spouse or heirs.
None of this shows up until someone pulls the buy-sell agreement and the estate plan out side by side. For business owners, that side-by-side review isn’t optional. It’s the difference between a succession plan that works the way you intended and one that surprises your partners, your spouse, or both, at the worst possible time.
For more on coordinating these pieces, check out our guide on What Happens to My Business When I Retire?
Ask Yourself
a. Did you sign an irrevocable trust, make large gifts, or restructure ownership of a business specifically between 2023 and 2025 to “beat” the exemption sunset?
b. Does your revocable trust or will include formula language that funds a bypass or credit shelter trust “up to the federal exemption amount”?
c. Has your estate grown meaningfully since the last time your documents were actually reviewed, not just signed and quietly filed away?
If you answered yes to any of those, there’s a decent chance your plan was engineered for a storm that never made landfall.
The Fix Isn’t Complicated. The Review Is the Hard Part.
None of this means your plan is broken. It means it hasn’t been checked against the world as it actually exists in 2026. Formula clauses can be updated. Some trusts can be decanted or amended. Portability elections can be revisited. None of that happens on its own, though. Someone has to go looking, and “someone” rarely means the trust document itself.
For business owners, this matters even more. Ownership interests, buy-sell agreements, and succession plans often get pulled into these older estate structures too. A stale formula clause doesn’t just misallocate personal assets. It can tangle up how your business actually transfers to the next generation, or to your partners, or to whoever is supposed to be running things when you’re not.
The families who benefit most from this new exemption aren’t the ones who leave their 2023 plan alone and assume bigger numbers automatically mean a better outcome. They’re the ones who go back and confirm the storm they planned for is still the storm that’s coming.
Is your plan still protecting your family? Or is it protecting you from a tax bill that isn’t showing up anymore?
That’s worth twenty minutes to find out. Book a free consultation and we’ll walk through whether your estate plan still fits, or whether it’s just been standing guard against a storm that already passed.
Nayhife Wealth Management. Investment advisory services offered through LightSquare Wealth Management, LLC, a Registered Investment Adviser. Nayhife Wealth Management and LightSquare Wealth Management, LLC are separate entities. This content is for informational and educational purposes only and does not constitute legal, tax, or individualized investment advice. Estate planning strategies discussed, including bypass trusts, formula clauses, and step-up in basis rules, are general in nature and may not apply to your specific circumstances. Please consult a qualified estate planning attorney and tax professional before making changes to your estate plan. Investing involves risk, including the potential loss of principal. Past performance is not indicative of future results.
