The Death Tax Repeal Act of 2025 marks the latest GOP initiative to permanently eliminate the federal estate tax and generation-skipping transfer (GST) tax, reigniting long-standing debates around the taxation of wealth transfers.
A panel of leading trust and estate professionals recently convened to evaluate the bill's implications. Their analysis focused on practical estate planning challenges and recommendations for registered investment advisors (RIAs) and wealth planners navigating potential legislative change.
Legislative Overview Introduced on Feb. 13, 2025, the Act comprises House bill H.R. 1301, led by Rep. Randy Feenstra (R-Iowa) with 175 original bipartisan co-sponsors, and Senate bill S. 587, spearheaded by Sen. John Thune (R-S.D.) and backed by 45 Republican co-sponsors.
Both bills seek to:
Permanently repeal the federal estate and GST taxes Reduce the top gift tax rate from 40% to 35%
Retain the lifetime gift tax exemption ($10 million indexed for inflation; $13.99 million in 2025)
Preserve the step-up in basis for inherited assets Implement a 10-year transition rule for Qualified Domestic Trusts
A key distinction: the Senate version includes IRC Section 2511(c), treating transfers to incomplete gift non-grantor trusts (INGs) as taxable—an important detail for advisors using INGs as a state income tax mitigation strategy.
Legislative Hurdles
While the House could pass the bill along party lines, the Senate's 60-vote filibuster threshold poses a significant challenge. Republicans may attempt to use budget reconciliation, but that route is constrained by the Byrd Rule, requiring provisions to be budget-relevant and deficit-neutral beyond 10 years.
A $4.6 trillion scoring discrepancy complicates this further, alongside competing legislative priorities like tax relief for tips and overtime. Many lawmakers may lean toward extending the Tax Cuts and Jobs Act’s higher exemption levels instead of full repeal, placing the bill’s future in flux.
Strategic Planning Considerations for RIAs
Portability and Bypass Trusts
With repeal, portability planning becomes irrelevant—yet the panel emphasized the importance of preparing for the estate tax's possible return. RIAs should consider recommending clients fund credit shelter or bypass trusts upon the first spouse’s death, even in a repeal environment. This ensures exemption use and protects surviving spouses if estate tax is later reinstated.
GST Tax Strategy
If GST repeal occurs, ambiguity around exemption allocation could leave certain trusts vulnerable. RIAs should encourage clients to:
Fund irrevocable trusts before repeal takes effect to lock in current GST-exempt status
Avoid modifying existing GST-exempt trusts unnecessarily Preserving exemption integrity now avoids complications if the tax returns down the line.
Formula Clauses in Estate Documents Many estate plans include formula-based funding clauses tied to the federal exemption amount. A repeal could render those clauses ineffective or misaligned. Review these provisions in trust agreements to ensure continued clarity and functionality. Also consider whether clients reside in states with estate taxes; even if federal taxes are eliminated, state-level exposure remains and should be planned for accordingly.
Increased Importance of Income Tax Planning Without estate tax, the focus shifts heavily toward income tax efficiency. RIAs should revisit the carryover basis rules from 2010 (IRC Section 1022) and prepare for potential reimplementation. Understanding these rules will be vital in optimizing income tax outcomes for heirs and beneficiaries. Pay particular attention to cost basis adjustments, trust distribution planning, and capital gain minimization.
Planning Under Uncertainty
If estate tax repeal passes, the estate planning landscape transforms dramatically. However, given the political headwinds, repeal may be temporary or never fully realized. Wealth advisors should guide clients through flexible strategies that work under current law while remaining nimble for potential reversals.
Immediate action items:
Audit all client estate plans for federal and state tax alignment
Reinforce exemption planning via trust structures
Update formula clauses and dispositive provisions
Prepare for increased emphasis on income tax and basis planning
The estate planning framework is on the verge of a potential overhaul. For RIAs, now is the time to assess, educate, and adjust client strategies for a shifting tax regime.
