How ‘One Big Beautiful Bill’ tax code changes impact succession planning
The “One Big Beautiful Bill,” which President Donald Trump signed into law this summer, contains tax code changes relevant to those starting, running and selling their businesses.
Among the most prominent changes relevant to succession planning is the extension and increase of the federal estate tax exemption. The estate tax exemption determines the amount of an estate that people can transfer to their children or other heirs without being taxed.
The OBBB brings federal estate tax exemption up from $13.99 million to $15 million for single filers and from $27.98 million to $30 million for married couples filing jointly. The Tax Cuts and Jobs Act of 2017 previously raised the exemption from $5.6 million to $11.2 million. The threshold has since been adjusted annually for inflation.
This increase has been made permanent, or at least until a future administration makes updates to the federal tax code. Previous tax codes have included expiration dates that have been central to some business succession planning, said Joe Maier, senior vice president and director of wealth strategy at Racine-based Johnson Financial Group.
“It was common before the bill passed, or certainly before the election, to have conversations with business owners where part of what they were saying or part of what they were thinking is, ‘Even though I might not be ready to sell my business, I’ve got to because tax rates are going to go up,’” Maier said. “‘Even though I don’t want to give my business away necessarily to my kids. I don’t know if they’re ready. I don’t know if I’m ready. I need to do it before the estate tax exemption goes down.’”
For some clients, this perceived permanence has brought a “calm that we haven’t had for decades,” Maier said. They feel they have the space to consider family dynamics, family readiness and owner readiness when it comes to making decisions about the future of their businesses.
“For the first time in a long time, we’re hearing clients talk rationally and thoughtfully and carefully and economically about what they want to do with their business as opposed to being driven by some tax policy,” Maier said.
Instead of focusing on tax policies, clients are considering selling their business “when it makes economic sense, when the value of the business is at its highest level as opposed to looking at after-tax value,” Maier said.
Trace Tendick, a partner at Thiensville-based Blackhawk Capital Partners, said that the permanence of the estate tax exemption “needs to be taken with a grain of salt,” as it will likely be changed by a future administration.
Having the $15 million or $30 million exemptions can make a difference for businesses’ long-term planning, according to Brian Lamborne, senior wealth strategist at Brookfield-based Annex Wealth Management.
“You start planning as soon as you start the business for what you’re going to do with it at the end,” Lamborne said. “If you get out in front of a lot of this stuff and you start planning, you can actually do a lot to mitigate a lot of those taxes. The fact you have that first $30 million to play with is good.”
It can be important to have a wealth planning expert involved early in the process when starting a business to help “protect your future self from your present self,” said Annex Wealth Management chief economist Brian Jacobsen.
It can be easy to make decisions based on tax advantages, but it’s necessary to take a step back and “think about the entire life cycle” of the choice, he said.
‘Winners and losers’
Overall, there are “winners and losers” in the OBBB, Maier said.
He sees the prominent winner to be the manufacturing sector, which has new tax benefits in the OBBB.
A company planning to build a manufacturing facility in the U.S. can write off the expenses immediately. The OBBB also includes full expensing for equipment and facility improvements in manufacturing.
“There’s material opportunities in the manufacturing space that just didn’t exist before, and hopefully our clients who are in that manufacturing space, who are investing in the manufacturing space, take advantage of those as quickly as possible,” Maier said.
Domestic research and development can be similarly expensed because of the OBBB.
The OBBB also extended lower income tax rates. Income tax rates had been lowered during the previous Trump administration but were scheduled to increase at the end of 2025, “which would have had implications for planning,” Maier said.
While the OBBB has “provided those great opportunities,” removing tax credits poses challenges for some industries, Lamborne said. People have been incentivized to build their businesses around certain tax credits, so there are potential consequences for certain industries.
For example, the OBBB has rolled back green energy tax credits, including clean vehicle tax credits and the federal solar tax credit.
“The tax impetus to invest in those industries and to build in those industries are gone,” Maier said. “Those were industries where a great deal of the growth and value were in those tax benefits. Without those tax benefits, we have material losses in that whole green energy space.”
Business owners and sellers navigating the OBBB’s changes to the tax code should assemble a team “of competent tax, wealth and legal professionals” to work on their behalf, Tendick said.
“Too often we see clients that rely on one of these professionals in a silo and fail to understand how decisions may impact them in ways they can’t imagine,” Tendick said.