H.R.1, more commonly referred to as the Big, Beautiful Bill was signed into law on July 4, 2025. With the enactment of this 870-page bill, a wide variety of changes are set to take effect immediately or in the near future. Among these changes, the estate tax exemption is set to increase and continue increasing indefinitely with annual inflation adjustments. This change means that less taxpayers will have to pay estate taxes upon their deaths.

To provide greater detail, it is important to lay the framework for how estate taxes, commonly referred to as ‘death taxes,’ operate in practice. First, it is important to note that there are potentially two types of ‘death taxes.’  The federal government, through the IRS, sets the framework for estate taxes, which apply to all taxpayers. State governments, through their respective departments of revenue, can levy inheritance taxes, which apply to taxpayers who are residents of that state at the time of their deaths (as well as taxpayers who own property in those states).

Most states, including North Carolina, do not levy an inheritance tax. For North Carolinians who own property in other states, an inheritance tax may be applied in those states. The geographically closest states to North Carolina that have an inheritance tax are Kentucky, Maryland, and the District of Columbia. A total of twelve states and the District of Columbia have an inheritance tax. Note: Some of these states have both an inheritance tax and an estate tax – this information concerning laws outside of North Carolina is just to provide notice for North Carolinians who own land outside of North Carolina to check into their local laws concerning estate and inheritance taxes.

The estate tax, which is levied by the IRS on all taxpayers at the time of their death, is often a very requested topic during extension talks. The IRS levies the estate tax on the amount of assets that a taxpayer owns at time of death that exceeds the estate tax exemption. The assets that a taxpayer owns at the time of their death are collectively referred to as the taxpayer’s ‘gross estate’ (also called the ‘taxable estate’).

So, what is in your gross estate?

In short, a taxpayer’s gross estate will include the following types of assets, all measured at their fair market value:

• Beneficial interests (i.e., what the decedent owned in a revocable trust)
• Business interests (i.e., what you own in your LLCs, S-Corp, etc.)
• Ownership interests of real property (measured at fair market value)
• Tangible personal property (e.g., farm equipment, firearms, jewelry, vehicles)
• Salary owed at death (including bonuses)
• Accrued interest on investments
• Insurance proceeds (to include most life insurance proceeds, read here for more info concerning life insurance proceeds and estate taxes)
• Gifts made within three years of death

So, to set up a brief hypothetical example (where valuations are done at time of death, to simplify the changing nature of fair market value), let’s say there is a farmer who has a revocable trust. The revocable trust owns two LLCs. The first LLC, Sweet Potato, LLC, is the titled owner of a sweet potato field that is worth $200,000 at fair market value. Sweet Potato, LLC is also the titled owner of a tractor used for harvesting sweet potatoes, which is worth $100,000. The second LLC, Cattle, LLC, is the titled owner of a cattle pasture that is also worth $200,000. Cattle, LLC also owns the 20 head of cattle being raised on the pasture, which are worth $100,000.

So, per the IRS’ definition of gross estate, the farmer, through just his business interests, would have a gross estate of $500,000. Does it matter that his business interests were technically owned by the respective LLCs? No, because the IRS will consider both of those LLCs to be disregard entities – i.e., whatever the LLC owns, the farmer owns in the eyes of the IRS. Does it matter that his business interests are owned by a revocable trust? No, because as with the LLCs, the IRS will consider the revocable trust to be a disregarded entity so the farmer will be considered the owner of the revocable trust’s property (including the trust property owned through LLCs) during gross estate valuations. And, lastly, if the farmer was a 50% owner of the trust with his brother owning the other 50%, the farmer’s gross estate calculation with respect to farm assets would be cut in half.

Now, the farmer also lived in a house worth $400,000, which housed a $50,000 truck, $20,000 in firearms, $20,000 in other personal property (e.g., televisions, furniture, etc.), and had $10,000 in a personal banking account. These assets would also be included in the farmer’s gross estate, bringing his gross estate’s valuation to $1,000,000 now with both business and personal property.

To add one last set of hypotheticals, if the farmer had decided to gift the entirety of the trust to his son one year before he died, the trust’s property (including property owned by both LLCs) would still be part of the farmer’s gross estate. Likewise, if instead of gifting property to his son, the farmer decided to put his personal home in an irrevocable trust only to die two years later, the personal home would still be included in the gross estate valuation.

What changed in the Big, Beautiful Bill?

Under the 2017 Tax Cuts and Jobs Act, the estate tax exemptions were doubled from their prior amounts. As such, in 2025, the estate tax exemption was set at $13.99 million for individuals and $27.98 million for married couples.

Going back to the farmer example from above, his gross estate’s valuation at $1,000,000 indicates that the farmer, if an individual, is $12.99 million under the estate tax exemption and, if married, $26.98 million under the estate tax exemption. As such, that farmer would not have to pay estate taxes if he died in 2025.

The changes to the estate tax exemption under the 2017 Tax Cuts and Jobs Act were set to expire in 2025, meaning that the estate tax exemption in 2026 would be approximately half of the 2025 levels. As such, the estate tax exemption for individuals in 2026 was projected to be approximately $7 million for individuals and $14 million for married couples.

Under the Big, Beautiful Bill, the estate tax exemption for 2026 is now $15 million for individuals and $30 million for married couples. These exemption levels, which are adjusted annually for inflation, are now permanently set and will not revert back to their previous levels which were approximately half of their new levels. The end result is that a significantly lower number of taxpayers across the nation will now avoid incurring estate taxes at the time of their deaths, barring future changes to the estate tax exemption levels.

Read more about taxes!

Effects of Big, Beautiful Bill on Income Tax Rates, Deductions

Four Ways for Farmers to Avoid Estate Taxes in 2025