10 estate and tax strategies for 2025 and beyond

The current tax landscape presents significant opportunities.

On July 4, President Donald Trump signed the “One Big Beautiful Bill Act” into law, making many provisions of the Tax Cuts and Jobs Act permanent, including lower individual tax rates, the 20% Qualified Business Income (QBI) deduction with extended phaseouts, and enhanced standard deductions.

Notably, the federal estate and gift tax exemption has been increased to $15 million per person (or $30 million for married couples) starting Jan. 1, 2026, with annual inflation adjustments — preventing the previously scheduled reversion to roughly $7 million. This permanent higher exemption enables families to transfer even more wealth tax free, but proactive planning remains essential for 2025 to leverage current rules before any potential future adjustments.

In states like Illinois, where the state estate tax exemption remains at $4 million, residents may still face significant exposure. With the new law in place, now is the time to consult an estate and tax planning attorney. Here’s 10 strategies on how to do that:

1. Review your estate plan for accuracy and advanced planning opportunities

Even if your estate is below the newly permanent $15 million federal exemption starting in 2026, planning remains essential — especially if your family or financial circumstances have changed. In Illinois, residents can face estate tax exposure even if they are well below the federal level. To mitigate these risks, planning strategies may include forming a Family Limited Liability Company (LLC) for asset protection, valuation discounts, and centralized management, as well as trust-based techniques such as:

• Transferring assets to an Intentionally Defective Grantor Trust (IDGT) to shift future appreciation out of the estate;

• Funding a Spousal Lifetime Access Trust (SLAT) to maintain indirect access to transferred wealth through a spouse; or

• Creating a Grantor Retained Annuity Trust (GRAT) to pass appreciation to heirs while retaining an annuity interest.

These tools can significantly reduce estate tax liability and help preserve wealth across generations.

2. Make your trust income and estate tax efficient with BIAT planning

Beneficiary Income Accumulation Trust (BIAT) planning should be included in most trusts, including revocable living trusts with A/B planning. BIATs combine the estate tax benefits of irrevocable trusts with the income tax advantages of individual tax treatment — avoiding both compressed trust income tax brackets and other tax drawbacks sometimes applicable to trusts. Rather than the irrevocable trust being taxed as a separate taxpayer or the trustmaker bearing the tax burden, the beneficiary is treated as the “deemed owner” for income tax purposes by being granted a limited power to withdraw income annually. This allows trust assets to grow outside both the trustmaker’s and beneficiary’s estates, while the beneficiary — not the trust or trustmaker — pays the income tax, preserving more principal over time. BIATs are especially useful for multigenerational planning, offering income tax efficiency, asset protection, and flexibility, even under permanent tax rates established by the new law.

3. Achieve stepped-up basis for low-cost assets

Gifting appreciated assets during your lifetime usually results in a carryover cost basis, meaning your heirs may face significant capital gains taxes when they sell those assets. When dealing with low-basis assets, consider irrevocable trust techniques such as Upstream Support Trust (UST) planning and Step-Up Rescue Financing (SURF) planning. These strategies allow clients to achieve a step-up in basis on their own assets upon the death of older relatives, such as parents or grandparents. These approaches enable trust beneficiaries — including the trustmaker’s spouse in many scenarios — to benefit from a step-up in basis to the assets’ current fair market value upon the relevant death, significantly reducing or even eliminating capital gains tax upon later sale. This step-up also resets basis for depreciation purposes.

4. Establish an irrevocable life insurance trust funded with permanent life insurance

Permanent life insurance is an often overlooked or underutilized asset class. With proper irrevocable life insurance trust (ILIT) planning, permanent life insurance can provide totally income tax-free and estate tax-free liquidity upon death to efficiently address estate taxes and preserve family wealth. The unique and elegant simplicity of pairing permanent life insurance with ILIT planning is often the missing link that should be considered by many families — particularly with the permanentized tax provisions in the new law enhancing long-term wealth preservation.

5. Establish residency in Florida, Texas, or other more tax-friendly states

Establishing residency in a tax-friendly state such as Florida, Texas, or Tennessee can provide significant financial, legal, and estate planning benefits. These states impose no state income tax and no estate, gift, or inheritance tax, allowing residents to retain and transfer more wealth. Florida offers robust creditor protections through its homestead exemption, favorable trust and probate laws, and strong protections for retirement accounts and insurance proceeds. Texas similarly provides generous asset protection laws, a business-friendly legal environment, and constitutional safeguards for homesteads. Tennessee, having eliminated its investment income tax, now offers a fully income-tax-free environment along with strong trust laws, including the use of long-term “dynasty” trusts and self-settled asset protection trusts.

6. Convert to a Roth IRA while rates are low — especially if the market dips

Roth conversions allow you to move funds from a traditional IRA to a Roth IRA and pay income taxes now, while rates remain relatively low under the permanentized TCJA brackets. This can be a powerful hedge against potential future rate increases. Bonus: Paying the income tax on a conversion also can reduce eventual state and federal estate taxes. Note: Roth conversions are irreversible, so consult a tax professional before proceeding. Many taxpayers convert only as much as they can each year without pushing themselves into a higher tax bracket.

7. Maximize the QBI deduction if you are a business owner

The 20% QBI deduction remains a major benefit for many pass-through business owners. Under the new bill, it is now permanent with extended phaseout thresholds starting at $75,000 for single filers ($150,000 for joint filers) for specified service trades or businesses. In 2025, the phaseout for non-service businesses aligns with prior levels, but planning is key. To stay eligible, consider deferring income, increasing retirement contributions, or accelerating business expenses. Ironically, there are cases where using Roth instead of traditional retirement accounts or doing a Roth conversion can increase the QBI deduction — particularly for single business owners whose taxable income is lower than their QBI due to the standard or itemized deduction. Because the deduction is based on the lesser of 20% of taxable income or 20% of QBI, increasing taxable income through a Roth conversion may actually yield a larger QBI deduction.

8. Leverage the Pass-Through Entity Tax (PTET) deduction

The new bill preserves the PTET deduction, retaining the workaround for state and local tax (SALT) limitations while raising the SALT cap to $40,000 (adjusted for inflation through 2029). This allows pass-through entities like partnerships, LLCs, and S corporations to pay state taxes at the entity level, providing a federal deduction uncapped by individual SALT limits. For example, an Illinois taxpayer with $1 million in pass-through income from an LLC might face a state tax of roughly $49,500 (at 4.95%). By electing PTET, the LLC pays this tax directly, allowing a full federal deduction and a state credit — effectively bypassing the SALT cap and saving on federal taxes. This remains valuable even with the higher SALT cap, especially for those whose state tax liabilities significantly exceed $40,000.

9. Plan around Qualified Small Business Stock (QSBS)

Business owners should consider Section 1202 planning for QSBS, especially in light of the new bill’s enhancements effective for stock acquired after July 4, 2025. These include:

• A shortened holding period (partial gain exclusion starting at three years: 50% for 3-4 years, 75% for 4-5 years, and 100% for 5+ years);

• An increased gross asset limit to $75 million (inflation-adjusted); and

• A raised per-issuer cap to $15 million (inflation-adjusted).

Stacking with non-grantor trusts amplifies the benefits: by gifting QSBS to multiple irrevocable non-grantor trusts, each trust can claim its own $15 million exclusion, multiplying tax-free gains while removing assets from the grantor’s estate — ideal for founders or investors in eligible startups.

10. Use charitable IRA rollovers and other techniques to give tax efficiently

If you’re age 70½ or older, you can donate up to $108,000 in 2025 directly from your traditional IRA (but not other qualified plans) to qualified charities using a Qualified Charitable Distribution (QCD) — a tax-free strategy that also satisfies your Required Minimum Distribution (RMD). This is more income tax efficient than taking an RMD and then giving money to charity.

For larger gifts or appreciated assets, consider using a Charitable Remainder Trust (CRT) to create an income stream, defer income tax on a sale, generate a charitable deduction, and reduce estate and capital gains taxes. Alternatively, a Donor-Advised Fund (DAF) allows you to make a single tax-deductible contribution and recommend grants to charities over time — simplifying your giving and maximizing impact.

Act now to benefit

With the new tax law in effect, now is the time to reassess your estate and tax planning strategy. These moves can help preserve your wealth, reduce future tax burdens, and ensure your legacy is protected — no matter what comes next.

• Andrew Kelleher, Robert Holland and Edwin Morrow are senior attorneys and principals at Kelleher + Holland, LLC. K+H is a nationally recognized, full-service law firm with more than 70 legal professionals headquartered in North Barrington and offices throughout the country. They can be reached at akelleher@kelleherholland.com, rholland@kelleherholland.com and emorrow@kelleherholland.com.