What Changed in July

For two years, much of the estate-planning literature in this country was written around a deadline that never came. The Tax Cuts and Jobs Act had scheduled the federal gift and estate exemption to halve on January 1, 2026, and a cottage industry of advisory notes, client memos, and hurriedly executed trusts rose up to meet it. Then, on July 4, 2025, the One Big Beautiful Bill Act made the higher exemption permanent — $15 million per person, indexed for inflation — and the deadline quietly disappeared.

What is less discussed is that the same bill reopened the rules for founder stock. The §1202 QSBS regime, largely unchanged for nearly a decade, acquired a new holding-period ladder, a higher per-issuer cap, and a broader qualifying-company threshold — all of which apply only to stock issued after that same July 4. Two bodies of law, one signing date, and a great deal of planning built on assumptions that no longer hold.

The sunset that didn't come

For most of 2024 and the first half of 2025, a very particular kind of conversation was taking place in family offices and estate-planning practices across the country. The federal gift and estate exemption — temporarily doubled by the Tax Cuts and Jobs Act in 2017 to roughly $12 million per person, indexed — was scheduled to revert to roughly half that amount on January 1, 2026. The arithmetic was unambiguous. A couple with $20 million in combined assets who moved before the deadline could, in theory, move roughly twice as much outside their taxable estate as a couple who waited.

The result was a rush. SLATs — spousal lifetime access trusts — were executed in ascending volumes through 2024. GRATs were front-loaded. Outright gifts were structured and documented in the last quarter of the year. Much of this was prudent, if hurried. Some of it was speculative, built on the assumption that even if Congress extended the exemption, the higher number probably wouldn't survive the next administration.

On July 4, 2025, that assumption collapsed. The One Big Beautiful Bill Act, signed into law that morning, set the federal estate, gift, and generation-skipping transfer exemption at $15 million per person — $30 million per married couple — effective January 1, 2026, indexed for inflation, and permanent. The word "permanent" in tax legislation has a particular meaning: it is not permanent in the sense that it cannot be changed, but in the sense that it carries no scheduled expiration. It will stay at $15 million until Congress decides otherwise, which may be a long time or a short one, but is, for the first time in nearly a decade, no longer on a calendar.

The sunset did not happen.

What the families who moved early actually did

For the families who executed large irrevocable transfers in 2024 and the first half of 2025, the natural next question is whether they moved for a cliff that never came. The answer is more complicated than yes or no.

What they did is remove assets from their taxable estate and, in many cases, place them in vehicles — SLATs, dynasty trusts, gift trusts — that continue to compound outside the estate for years or decades. The federal exemption being permanent at $15 million does not erase that benefit. It changes what the benefit is for. What was sold as a race against a deadline now reads, in retrospect, as early use of an exemption that was going to stay available anyway. The structures are not wasted; they are simply doing a different job than the one advertised.

Whether those structures still earn their complexity — their administrative burden, the loss of grantor-spouse access upon divorce or death, the generational asset lock — is a question that deserves fresh review, not a conclusion that can be drawn from a law change alone.

The map that still applies

There is a second fact, easy to forget in the relief that follows a deadline's disappearance: the federal exemption was not the binding constraint for many of the families who filed returns under it.

Roughly eighteen U.S. jurisdictions impose their own estate or inheritance taxes, with exemption thresholds often well below the federal figure. Oregon begins taxing above $1 million. Massachusetts above $2 million. Washington State, Illinois, Minnesota, and Connecticut each set their own thresholds, several of them well under the pre-OBBBA federal amount. The specific numbers drift from year to year and should be verified against each state's current law before any planning conversation, but the point is structural. A family with $8 million of assets in Oregon or Massachusetts has a state estate-tax problem regardless of what Congress did in July.

OBBBA did not change any of this. It is a federal bill that adjusted federal rules. The state estate-tax map looks almost exactly as it did on July 3, 2025.

This matters because the families who moved federal assets into SLATs or gift trusts to avoid a federal cliff often have the same exposure at the state level, and in many cases a more pressing one. For residents of states with their own estate tax, the planning motive never was about the sunset. It was about domicile, residency trusts, and the timing of death — none of which OBBBA touched.

And domicile, in particular, is not casually established. Moving to Florida or Tennessee the year before an anticipated death is the kind of plan that draws auditor attention, and states with aggressive residency departments — California and New York most prominently — apply multi-factor tests that include voter registration, driver's license, physicians, the location of pets, the storage of heirlooms. Residency trusts can be useful, but they are not a substitute for a genuine change of life, and they are not portable across state lines the way federal structures are. None of this is new. What is new is that, for families who spent 2024 focused on the federal cliff, the state map is once again the first place to look.

A parallel change, less discussed

The same signing that ended one deadline opened another.

Buried deeper in the same July 4 bill, and largely overlooked in the estate-planning commentary that followed, was a substantial rewrite of §1202 — the Qualified Small Business Stock exclusion, the primary federal tax benefit available to founders, employees, and early investors in qualifying C-corporations. The changes apply only to stock issued after July 4, 2025, which means that for anyone holding founder or early-employee stock that straddles the date — and this is common; it describes nearly every company founded before 2020 that has issued new grants since — two versions of the law now coexist on a single cap table.

This is not the kind of change that makes the evening news. It does not rearrange the top end of the estate-tax discussion, or trigger the rush of client calls that a doubled exemption would. But for the founder who signed an LOI in late 2025, for the early employee sitting on a mix of 2019 grants and 2026 grants, for the family office that holds QSBS across multiple vintages, the new regime is the live question, and it is in many respects more complicated than what it replaced.

The estate thread and the QSBS thread share a shape: a law changed, and plans built under the old version continue to exist. What follows is the mechanics.

Two regimes on the same cap table

Before OBBBA, §1202 was, in broad terms, a binary instrument. Stock issued by a qualifying C-corporation with gross assets under $50 million, held for at least five years, was eligible for a 100% exclusion on gain up to the greater of $10 million or 10× the basis. Shorter holding periods received no exclusion at all. The non-excluded portion of any gain — the piece above the cap, or in excess of 10× basis — was taxed at 28%.

For stock issued after July 4, 2025, every one of those parameters changed. The gross-asset threshold rose from $50 million to $75 million, meaning more companies remain qualified further into their growth. The per-issuer cap rose from $10 million to $15 million, or 10× basis if greater. The holding-period structure is no longer binary: 50% exclusion at three years, 75% at four, and the familiar 100% at five or more. The 28% rate on the non-excluded portion remained.

Pre-July 4, 2025 stock stays under the old regime. The new rules apply only to new issuance. This creates what may be the most consequential feature of the reform for anyone already in the system: the dual-regime cap table. A founder who raised a Series A in 2021 and had new common issued to a key hire in late 2025 now holds two kinds of QSBS that behave differently under sale. Each has its own cap, its own holding-period profile, its own exclusion math. The lots can both qualify; they simply qualify under different rules.

The practical implication is that gain attributable to pre-July-4 stock and gain attributable to post-July-4 stock are best modeled separately. The aggregate is not $25 million of cap; it is $10 million under one regime and $15 million under the other, with different holding-period requirements attached to each. Whether any particular lot clears its holding period, and under which version of §1202, becomes a lot-by-lot question rather than a shareholder-by-shareholder one.

The tiered holding period deserves its own note. Under the old regime, a founder who sold at year three received no exclusion at all; the five-year mark was a cliff, and the planning around acquisition timing — §1045 rollovers, F-reorganizations, extensions — existed largely to protect the clock. Under the new regime, the cliff has become a ramp. A three-year sale of post-July-4 stock now carries a 50% exclusion, a four-year sale 75%, and the full 100% arrives at five, as it always did. For a founder contemplating an early liquidity event on post-OBBBA stock, the calculus is no longer binary. Earlier exits have real exclusion value, which was not true before.

What stacking looks like now

Stacking, in the §1202 context, is the practice of multiplying the per-issuer cap by allocating shares across separate taxpayers — each of whom then has their own independent exclusion. The mechanics did not change in July. What changed is the size of the cap being multiplied, and the timing of the stock that qualifies for multiplication.

The main moving parts, briefly.

A non-grantor trust is a separate taxpayer for federal income tax purposes, and can have its own §1202 cap. This is the foundation of most stacking strategies.

The §643(f) multiple-trust rule limits how aggressively this can be done. Trusts that share a primary beneficiary and a principal purpose of tax avoidance may be collapsed into a single taxpayer for federal purposes.

The reciprocal trust doctrine — a common-law rule, not statutory — can undo trust pairs that appear to be mirror images of each other, swapped between spouses to manufacture separate tax identities.

California does not conform to §1202. Residents pay state tax on gain that is federally excluded, which changes the expected value of a stacking plan meaningfully.

Each of these is a separate conversation with counsel. The purpose here is not to teach the mechanics — no 2,500-word piece is where a stacking plan gets built — but to name the four constraints so that a reader who is about to have the conversation knows what to ask.

If a plan was built for a cliff that never came, what is it still for? The SLAT that was executed to beat a 2026 deadline and the non-grantor trust structured around a $10 million QSBS cap were both designed for a law that changed on July 4, 2025. Neither is necessarily wrong now. Both deserve to be asked what they are now doing — and at what cost.

What didn't change

OBBBA rewrote two visible corners of the tax code in a single week. It made a temporary exemption permanent. It reopened a founder-stock regime that had been essentially static since 2010. These are not small changes, and for the families and founders caught in their particular gravity, they are worth reading carefully.

But most portfolios are not governed by the estate-tax code or by §1202. Most portfolios are governed by the quieter mechanics of after-tax compounding: turnover, distributions, wash-sale timing, the coordination — or lack of it — between taxable accounts and tax-deferred ones. None of that was on the bill.

Turnover kept compounding. Distributions kept arriving in December. Losses kept going unharvested, and gains kept being taken in the wrong account. The part of the tax code that matters most to most portfolios is the part the headlines never quite reach.

If you want to see where that erosion may be showing up in your own portfolio, The Check — a short diagnostic of your own portfolio's hidden tax — takes a few minutes.