Potential Impacts of Repealing the Estate and Generation-Skipping Transfer Taxes

Republican lawmakers recently introduced bills in the House and Senate that would repeal the estate and generation skipping transfer taxes. Although the idea of repeal may appear straightforward, it would likely create tax inefficiencies for plans already in place and uncertainty for plans moving forward. These taxes have existed in some form for more than a century, and their sudden removal would disrupt systems that have long relied on them.

Under current law, taxpayers benefit from a unified gift and estate tax exemption that increases each year with inflation. The exemption reached $13.99 million in 2025 and $15 million in 2026 under recent legislation. A separate and equal GST exemption applies to transfers made to grandchildren and younger beneficiaries. The estate, gift, and GST taxes are imposed at a flat 40 percent rate on transfers that exceed the exemption amounts. Despite the high exemption, only a very small percentage of estates ever owe tax. Even so, many estate plans depend on formula clauses, portability elections, and long term trusts that could be disrupted if the taxes are repealed.

A repeal would create immediate complications for plans that use formula clauses to divide assets between family trusts, marital trusts, or charitable beneficiaries. These formulas are designed to operate in a system that includes estate and GST taxes, so a sudden repeal could cause assets to pass in ways that do not reflect the decedent’s intent. Plans that rely on portability would also face uncertainty because the repeal would eliminate the election entirely. Estate planners would need to consider revised drafting that anticipates both repeal and the possibility of reinstatement in the future.

Repeal would also affect income tax planning. The current proposal keeps the step up in basis at death, which has become one of the most valuable tax benefits for wealthy individuals. Many taxpayers have transferred assets to irrevocable trusts in recent years, expecting the exemption to decrease. These gifts carry a lower carryover basis, which would be less advantageous if the estate tax disappears but basis adjustments remain. Families with dynasty trusts would face additional questions if the GST rules are removed because there would no longer be a way to allocate GST exemption to new transfers.

Even if the estate and GST taxes are repealed, the gift tax would remain in place as a backstop to prevent taxpayers from shifting assets among family members solely to avoid income tax. State taxes would continue to pose challenges because more than a dozen states impose their own estate or inheritance tax. The potential repeal would require careful reconsideration of business succession planning, life insurance needs, and buy sell agreements. Estate planners would need to monitor federal and state developments closely because the repeal would create significant uncertainty and would likely require more frequent updates to estate plans to preserve both intent and tax efficiency.

For more information see Abbie M.B. Everist and John Martin Nuckolls “Potential Impacts of Repealing the Estate and Generation-Skipping Transfer Taxes,” ABA Probate and Property Journal, September 1, 2025.