Charitable Planning in the Aftermath of the OBBBA
23rd September 2025
When Congress passed the One Big Beautiful Bill Act (OBBBA), headlines largely focused on the higher estate tax exemption, changes to income tax brackets, and updates to business deductions. But tucked within the bill are implications that may reshape how high-net-worth families approach charitable planning.
Far from narrowing opportunities, the OBBBA has opened a new golden age of giving. An age in which individuals, families, and their advisors can align philanthropy with wealth preservation and tax efficiency in powerful new ways.
Higher Exemptions, Longer Runway
The OBBBA extended the historically high estate and gift tax exemption through at least 2029. At $15 million per individual (over $30 million per married couple), the window for tax-free transfers has never been more generous.
That’s a win for dynasty planning, but also has ripple effects for charitable planning. With fewer families now facing estate tax liability, some might assume charitable giving will take a back seat. After all, if philanthropy is often motivated by tax savings, why give when the tax “need” is less urgent?
The reality is more nuanced. High exemptions create breathing room, allowing donors to think about charitable planning not as a defensive tax move, but as a strategic choice. Families who want to weave philanthropy into their legacy can now do so in ways that are more deliberate, flexible, and enduring.
The Retirement Plan Problem
It’s important to note that while the OBBBA reshaped many tax provisions, it offered no relief for IRAs or other qualified retirement plans at death. This makes retirement accounts a uniquely problematic asset class for wealthy families with taxable estates. Why?
- No step-up in basis. Unlike other assets, IRAs and qualified plans do not reset their cost basis at death.
- Double taxation. Estate tax is applied first, then the remainder is subject to income tax as beneficiaries withdraw it.
- The result? Typically, less than 35% of retirement account balances go to heirs, while 65% (or more, there may be state income tax as well) ends up with the IRS and state taxing authorities.
That’s a sobering reality. But it also creates a powerful charitable opportunity. Families can designate retirement plans for charitable gifts, either outright or through charitable vehicles, while using other, more tax-efficient assets to pass wealth to heirs.
Strategies such as Qualified Charitable Distributions (QCDs) or even early, tax-managed distributions during life (paired with wealth replacement via life insurance or trusts) can transform what would have been the worst asset to inherit into one of the most impactful gifts. In fact, thoughtful planning can leave heirs with three to four times more than they would otherwise receive.
The Role of Charitable Vehicles
The OBBBA didn’t just extend the exemption. It also maintained favorable rules around charitable vehicles. These include:
- Charitable Remainder Trusts (CRTs): Still a powerful tool for those with appreciated assets. A CRT allows donors to defer gains, receive income for life (or a term of years), and leave the remainder to charity, often achieving better tax outcomes than an outright sale.
- Charitable Lead Trusts (CLTs): Particularly attractive in a high-exemption world. Donors can shift assets out of their estate while funding annual charitable gifts. With lower estate pressure, CLTs can be designed with more aggressive terms to maximize philanthropic impact.
- Private Foundations & Donor-Advised Funds (DAFs): The OBBBA didn’t touch these vehicles, and in fact, the higher exemption may encourage families to create or expand them. Foundations and DAFs allow donors to “institutionalize” their giving, teaching the next generation about stewardship and values.
Combined with thoughtful retirement account planning, these vehicles give families a robust toolkit to align tax efficiency with charitable intent.
The SALT Cap and Income Tax Planning
One of the OBBBA’s other big features was the adjustment to the state and local tax (SALT) deduction cap. While relief was granted, many high-income earners in states like California, New York, and New Jersey still face limited deductions.
Charitable planning becomes a direct way to offset these challenges. For those who have already maxed out SALT deductions, charitable contributions may represent the most effective way to reduce income tax liability. Layering in strategies such as “bunching” contributions (making multiple years of gifts at once, often through a DAF) can magnify the impact.
Section 179 and Business Owners
The OBBBA also expanded Section 179 expensing and extended bonus depreciation. For business owners, this creates opportunities to reinvest in their companies while also thinking about charitable planning.
Many entrepreneurs find themselves asset-rich but liquidity-poor. By donating closely held business interests to charity (directly or via a charitable vehicle), they can generate current income tax deductions, diversify their wealth, and ensure a portion of their enterprise supports causes they care about. With favorable rules under OBBBA, this strategy deserves a fresh look.
Aligning Philanthropy with Family Legacy
Perhaps the most important shift brought about by OBBBA is psychological. With fewer families urgently driven by estate tax pressure, charitable planning becomes less about obligation and more about intention.
This is where planning can get exciting. Instead of focusing narrowly on tax avoidance, families can ask bigger questions:
- What values do we want to reflect in our giving?
- How do we want future generations to experience philanthropy?
- Which structures best fit our long-term goals: a foundation, a DAF, a trust, or a combination?
In many cases, families are designing “charitable constitutions.” These are documents that spell out not only where money should go, but also how children and grandchildren should participate in the decision-making. This level of planning ensures that philanthropy becomes a living part of the family’s identity, not just a line on a tax return.
A Case in Point
Consider a Houston family who recently sold their manufacturing business. With $50 million in liquid wealth, they are well above the exemption, even under OBBBA. We helped them pair a charitable lead trust with a new family foundation.
The CLT provides a stream of annual gifts to their favorite literacy charity (a cause tied to the family’s personal story). Meanwhile, the foundation gives their children a “boardroom” to practice governance and philanthropy. The tax benefits are substantial, but more importantly, the family has transformed its liquidity event into a multi-generational legacy of impact.
Moving Forward
The OBBBA has been called a “platinum age” for estate planning. The same can be said for charitable planning. With higher exemptions, extended time horizons, and a still-robust toolkit of charitable vehicles, affluent families have the chance to design giving strategies that are purposeful, flexible, and enduring.
The key is coordination. Effective charitable planning doesn’t happen in a vacuum but rather requires input from wealth managers, attorneys, CPAs, and often multiple generations of a family.
Done right, it transforms philanthropy from a tax tactic into a legacy-defining strategy. And that may be the most beautiful outcome of all.