Beyond Tax Avoidance (Daniel Robinson Commentary)

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On July 4, the One Big Beautiful Bill Act (OBBBA) was signed into law, extending the Tax Cuts & Jobs Act’s historically high estate, gift and generation-skipping transfer tax exemptions. The exemptions are currently $13.99 million per individual and $27.98 million per couple, indexed for inflation.

The extensions create one of the most favorable wealth transfer environments in decades, making it possible to transfer significant wealth during life without incurring federal transfer taxes. Now that the bulk of Arkansans will not owe estate taxes, the priority for most families will be less about tax avoidance now and more focused on transitioning their wealth effectively and, hopefully, not through the court system.

It is crucial to consult with your financial adviser, accountant and attorney to create a comprehensive trust and estate plan that is appropriate for your unique situation. Avoid relying solely on what I call accidental estate planning methods, such as adding a payable on death (POD) designation to bank and investment accounts. POD designations take precedence over other estate plans. If you add a local family member to a POD account to handle emergencies, this could create unintended outcomes if your goal was to distribute assets evenly. They also don’t address how your assets should be managed if you become incapacitated, which can add further anxiety and complexity for your family.

Here are a few practical strategies to leverage the OBBBA’s provisions and preserve generational wealth before death or incapacitation:

►Parents can give a child or individual up to $19,000 tax-free. Spouses can each give $19,000 to the same person for a total of $38,000 without tax consequences. If a child is married, parents could give the spouse $38,000 and pass down $76,000 without any tax implications.

►Giving assets that are likely to increase their value significantly in the future, such as property or stock, while holding highly appreciated assets until death helps families minimize future tax liabilities across generations. The OBBBA retained the step-up in basis provision, allowing heirs to inherit assets at current market value rather than the original purchase price, which reduces or eliminates capital gains exposure on appreciated property.

►The OBBBA extended enhanced deduction limits for charitable giving. Cash gifts to qualified charities can still be deducted up to 60% of adjusted gross income. One of the most effective techniques is “bunching,” or grouping several years of contributions into a single tax year. By exceeding the standard deduction in that year, donors maximize their tax benefit while still meeting long-term charitable goals.

►A qualified charitable deduction out of an individual retirement account is another option to minimize taxes for someone over 73 who is beginning to get required minimum distributions from an IRA. Qualified distributions from an IRA to a charity don’t show up as income.

The OBBBA’s extensions are a game changer for generational wealth transfer. The current environment favors those who plan and take steps now. Working with trusted advisers, you can transfer your wealth smoothly and tax-efficiently to the next generation.

Daniel Robinson is vice president, senior trust investment manager for Arvest Wealth management.

Daniel Robinson is vice president, senior trust investment manager for Arvest Wealth Management.