Most entrepreneurs think about taxes only at two moments: when they make money and when they sell. But for business owners and investors whose enterprises continue to grow, the largest tax bill of all often arrives later, at death.

Estate planning is not just about distributing assets; it’s about ensuring that what you’ve built can continue without interruption, forced liquidation, or unnecessary loss. And under today’s tax law, that requires understanding how the gift tax, the estate tax, and the unified credit work together.

The Federal Gift and Estate Tax: One System, Two Moments

The United States doesn’t wait for death alone to tax transfers of wealth. It also taxes lifetime gifts. The gift tax and the estate tax operate as parts of a single system.

• The gift tax applies to lifetime transfers of assets for less than fair value.
• The estate tax applies to the total value of assets you own or control at death.

Both share the same progressive rate structure, with a top rate of 40 percent, and both draw against the same exemption through the unified credit.

The Unified Credit: Your Lifetime and Legacy Exemption

The unified credit offsets the tax on both gifts and bequests. In practice, it allows you to transfer a certain amount of wealth free of federal tax, whether during your life or at death. Every taxable gift you make during life reduces the amount of exemption remaining for your estate and should be reported to the IRS.

Under the One Big Beautiful Bill Act of 2025 (OBBBA), that exemption is now $15 million per person (or $30 million per married couple), indexed for inflation going forward. This unified credit replaced the old “Sunset” provisions that threatened to cut the exemption in half after 2025.

For high-growth entrepreneurs, OBBBA’s permanence offers both opportunity and responsibility. There is no longer a legislative countdown, but your business itself now sets the timeline.

The New Time Crunch: When Growth Outpaces Planning

Under OBBBA, estate planning is a race against your company’s growing valuation, not Congress.

The moment your company becomes attractive to a buyer or investor, you’ve effectively started the clock. A Letter of Intent (LOI), term sheet, or even informal discussions that signal an anticipated sale price can fix the company’s fair-market value for tax purposes.

Once that value is “on record,” it’s nearly impossible to claim a lower figure for gift or estate planning. This means the LOI has replaced the Sunset as the new time pressure in estate planning. The opportunity to freeze today’s lower value and shift future appreciation out of your taxable estate ends once the market sets the number.

Why Valuation Is Everything

The estate tax applies to the fair-market value of your assets at death, which is the price a willing buyer would pay a willing seller. For a privately held business, that value can be substantial on paper but difficult to monetize in reality.

When estate tax is due (usually within nine months of death), the IRS expects payment in cash. Families who own illiquid businesses may have to sell stock, property, or even parts of the company to raise funds quickly.

The government provides limited relief, allowing certain estates with active, closely held businesses to pay estate tax in installments over up to 15 years. But qualifying is complex, interest accrues annually, and any sale or change in business structure can trigger immediate acceleration of the remaining tax due.

In practice, §6166 buys time but not security. It doesn’t remove the liability; it simply spreads it out, sometimes at the cost of restricting how the business operates.

When Growth Becomes a Tax Liability

The estate tax begins to bite when your company’s equity, real estate, and investments collectively exceed the unified credit threshold. A business worth $25 million today could double or triple within a decade. At a 40% estate tax rate, a $100 million enterprise could leave your family facing a $40 million bill, which is high regardless of the timeline for payment.

Even the most successful families rarely have that kind of liquidity available without selling part of what they’ve built.

That’s why planning before valuation spikes or buyers emerge is essential. The goal is to use the gift tax strategically, not reactively.

Using the Gift Tax to Protect the Estate

A lifetime gift that qualifies as “complete” under §§ 2501–2511 of the Internal Revenue Code shifts future appreciation out of your estate. You pay no gift tax as long as the value transferred fits within your remaining exemption under the unified credit.

This is known as a freeze strategy: you lock in today’s value, so tomorrow’s growth belongs to the next generation.

A gift of a minority, non-controlling business interest can also qualify for valuation discounts, typically 30 to 40 percent, for lack of control and marketability. A $10 million interest might be appraised at $6 million for gift-tax reporting, allowing you to move more value out of your estate while using less of your exemption.

Once an LOI or offer establishes a clear market value, however, those discounts vanish.

Planning for Both: Lifetime and Legacy

Modern estate planning involves balancing two fronts:

• During life: use the gift tax and unified credit to move appreciating assets into irrevocable trusts before valuations rise.
• At death: ensure your estate remains below the taxable threshold—or that liquidity exists to pay any tax due without dismantling the business.

The most effective strategies integrate both, using tools such as grantor trusts, family limited partnerships, and Private Family Trust Companies to manage assets while keeping governance and purpose intact.

The Takeaway

OBBBA brought stability to estate planning. The threat of a legislative sunset has passed, but the reality of business growth remains. For founders and families with appreciating assets, estate and gift tax planning isn’t about avoiding tax law changes anymore; it’s about anticipating your own success.

Every growth milestone, every capital raise, every Letter of Intent is a signal to revisit your structure. With the unified credit at its highest, the best time to act isn’t when Congress changes the law; it’s before the market does.

For Educational or Informational Purposes Only.