Death Tax Repeal Act of 2025
The Death Tax Repeal Act of 2025 would terminate the federal estate tax and the generation-skipping transfer (GST) tax for deaths and transfers occurring after the date of enactment. In addition, the bill makes substantial changes to the gift tax regime: it introduces a large lifetime gift exemption (initially $10,000,000, indexed for inflation), revises how the gift tax is calculated and collected, and expands the treatment of transfers in trusts as taxable gifts unless the trust qualifies as owned by the donor or the donor’s spouse under grantor trust rules. The act also adds transitional rules to address ongoing planning and clarifies new termination provisions in the Internal Revenue Code. The changes are effective for estates and gifts after enactment, with a transitional provision that splits the enacted year into two for certain tax computations.
Key Points
- 1Estate tax repeal: The estate tax will not apply to estates of decedents dying on or after enactment, with limited transitional rules for certain distributions from qualified domestic trusts (QDTs) related to pre-enactment deaths.
- 2GST tax repeal: The generation-skipping transfer tax will not apply to transfers occurring on or after enactment.
- 3Gift tax modifications: The gift tax regime is overhauled, calculating tax as a “tentative tax” on the cumulative gifts for the year and prior years, with a new lifetime gift exemption of $10,000,000 (indexed for inflation) and a revised rate structure. The exemption is adjusted annually using cost-of-living adjustments and rounded to the nearest $10,000.
- 4Transfers in trust treated as gifts: Transfers in trust are generally treated as taxable gifts unless the trust is treated as wholly owned by the donor or the donor’s spouse under grantor trust rules.
- 5Effective date and transitional rules: The amendments apply to gifts made and estates of decedents dying after enactment. A transition rule splits the enactment year into two calendar years for applying certain sections (1015(d), 2502, 2505) and for section 2504(b) purposes, to manage the shift from prior law to the new regime.