Benjamin Franklin famously declared that nothing is more certain than death and taxation. Since 1916, the federal government has imposed estate taxes on transfers of property owned by death.

But the Trump administration and Republican lawmakers may be on the verge of changing all of this. Republican lawmakers are now considering a large-scale bill that includes major tax changes and may be passed by June or July 2025. Among the measures considered by the House and the Senate, this is the Death Tax repeal bill, which will end federal estate taxes and lower the tax rate for life gifts.

If the Death Tax repeal bill becomes law, it will happen at a critical moment. Over the next few years, the baby boomer generation is expected to leave $8.4 trillion for its heirs, which is called the largest transfer of wealth in human history.

As law professors specializing in trusts and estates, we are interested in what might happen next. Interestingly, while the long-term impact on the federal budget will be significant, abolishing the real estate tax will complicate the legacy plans of wealthy taxpayers who may not be able to save so much money. To understand why, let’s consider how estate taxes work now.

According to current legal plan

Opponents of the policy have long ridiculed the inheritance tax of the “death tax” as levied on property transferred at the time of death. It is part of the federal gift and real estate tax system, which imposes a 40% tax on gifts transferred at life or death. Proponents of the estate tax believe it reduces inequality and encourages charitable donations.

But most Americans, even very wealthy Americans, never pay any gift or estate tax. That's because millions of dollars of assets transferred after death are completely exempt from waivers.

In 2025, individuals’ cumulative gift and estate taxes are $13.99 million and married couples’ $27.98 million. The current exemption doubled under the Tax Cuts and Employment Act, and President Donald Trump signed the law in 2017. This year's sunset. Unless Congress passes new legislation, the amount of exemption will return to its personal $5 million in 2017, as well as an adjustment to inflation. That will increase the amount of inheritance to be levied.

Of course, if the Death Tax Repeal Act is passed, there will be no federal transfer tax on the estate.

The estate tax is a lightning rod on Capitol Hill, although it won't affect many Americans. In 2022, the U.S. Treasury Department collected $22.5 billion in estate tax revenue from 3,170 estates. More than 3 million people died, so only 0.1% of the dead left enough assets for their estate to pay taxes.

Big Freeze: How Ultrarich Lowers Its Tax Liability

In addition to exploiting this generous exemption, wealthy taxpayers currently use multiple planning techniques to reduce or eliminate estate taxes.

A common strategy involves minimizing taxes on assets that may grow value. For example, suppose a person owns $25 million worth of property and they have used up their waiver (currently $13.99 million). If the value of the $25 million property rises to $125 million and the person waits until death to transfer it to the next generation, then the entire investment (all $125 million) will be subject to a 40% estate tax.

To reduce these taxes without completely abandoning control, complex “legacy freeze” planning technology allows owners to use the assets for gift tax purposes before they are levied, while retaining them on gifted properties. In our example, if the $25 million asset was transferred through a frozen device such as a deliberate defective grantor trust fund, the only tax would be a 40% gift tax on $25 million. All praises - the other $100 million - will not be subject to gifts or estate taxes.

Other real estate planning techniques can further reduce valuations through minority interest payments, lack of sales and other discounts. With such technology, wealthy Americans can pass approximately $200 billion in inherited assets each year without paying estate taxes.

The Death Tax repeal bill will not directly affect the tax treatment of charitable donations at the time of death - over $40 billion - but it may change the incentives for charitable donations.

Abolishing estate tax can subvert existing estate plans

Many of the heritage freeze scheme techniques that Ultrarich had previously used would become obsolete if Congress abolished the estate tax but collected the gift tax as proposed. There is no motivation to formulate a gift for a lifetime of property, which will be appreciated: individuals holding property until death will avoid federal transfers and capital gains taxes.

As a result, the abolition of the estate tax will keep existing estate plans out. The inheritance freezing strategy is predicated in the calculated trade-off: To reduce or eliminate estate taxes at death, the rich choose to make lifelong gifts, even if doing so can change lifelong ownership, create gift tax liability and sacrifice other tax benefits at the time of death.

Without an estate tax, existing estate freezing plans will limit the cost of life gifts without death. More importantly, some real estate freezing plans cannot be changed. For example, for gift tax purposes, a grantor trust that is intentionally defective must be irrevocable.

So while the abolition of estate tax seems to be attractive to wealthy Americans, tax benefits may actually be moderate at best for taxpayers who have real estate plans under the current system. Financial advisers also expressed concerns about developing new real estate plans designed to benefit from the abolition of estate taxes, as future Congress could restore taxes.

The abolition of estate taxes may also have macroeconomic implications. Tax incentives that retain ownership until death can make capital weaken the way economic growth. Individuals tend to become increasingly risky as they age, so the Death Tax repeal bill may bias investments towards safer asset classes. This could deprive young generations of capital from new businesses, such as startups.

Most importantly, abolishing the estate tax could harm taxpayers and the government. Those with enough wealth to exhaust high immunity are likely to have established real estate plans that cannot benefit from the abolition of real estate taxes. Meanwhile, for new real estate plans that try to retain ownership of the property until death, the government will lose a significant source of tax revenue – $22.5 billion in 2022 – from a few very rich heritages capable of paying taxes.

Of course, the abolition will also abandon the original purpose of estate tax, which attempts to reduce extreme wealth.