- The New $15 Million Estate Tax Exemption Doesn’t Replace Asset Protection - July 31, 2026
- Equity Stripping vs an Offshore Trust: Two Ways to Protect Real Estate - July 30, 2026
- Does CRS and FATCA Reporting Defeat a Cook Islands Trust? - July 29, 2026
The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently set the federal estate and gift tax exemption at $15,000,000 per individual for 2026, or $30,000,000 for a married couple using portability, with no scheduled sunset and inflation adjustments starting in 2027. For families who spent 2024 and early 2025 racing to use the old exemption before an expected drop to roughly $7,000,000, the pressure is off. What has not changed is anyone’s exposure to a lawsuit, and it is worth being precise about why a bigger exemption and an offshore asset protection trust solve two different problems.
Offshore Broker builds offshore asset protection structures for creditor and litigation exposure, a distinct problem from estate tax planning. Our team includes Connor Steens and John Evans, both with direct trustee and private banking experience in the Cook Islands.
What OBBBA Actually Changed
Before the Act, the elevated exemption created by the 2017 Tax Cuts and Jobs Act was set to expire at the end of 2025, reverting close to pre-2018 levels near $7,000,000 per individual. OBBBA eliminated that cliff and set the exemption at $15,000,000 per person permanently, meaning it does not revert on a future date absent new legislation. The federal estate tax rate stays at 40% on amounts above the exemption, and roughly 18 states and jurisdictions still impose their own estate or inheritance tax, often at thresholds far below the new federal number, so state-level exposure has not disappeared even where federal exposure has shrunk.
Why This Doesn’t Touch Lawsuit Exposure
Estate tax is a tax on wealth transferred at death. It has nothing to do with a plaintiff’s attorney trying to collect a $3,000,000 malpractice judgment while you are alive, a business partner’s creditor pursuing a personal guarantee, or a construction defect claim against a real estate portfolio. A physician whose estate now sits comfortably under the new $15,000,000 exemption is exactly as exposed to a malpractice verdict this year as before OBBBA passed. The two risks run on entirely separate tracks: one triggered by death, the other by a court judgment while you are alive, and a plan built to solve one does nothing for the other.
Where a Cook Islands Trust Fits Once Estate Tax Isn’t the Driving Concern
For clients who previously treated an offshore trust as one part of a broader estate tax reduction strategy, the calculus shifts, because a self-settled Cook Islands Trust was never primarily a tax tool in the first place. The trust is a grantor trust for US tax purposes: the IRS treats income and gains as the settlor’s own, and the underlying assets typically remain part of the settlor’s taxable estate at death, since the settlor retains a beneficial interest. What the higher exemption changes is the urgency around separate estate tax vehicles; what it leaves untouched is the case for a Cook Islands Trust as protection against a creditor who could reach assets long before any estate tax question arises. See our guide to who needs a Cook Islands Trust for the litigation-exposure profile this structure is built to address.
We help clients separate estate planning from asset protection planning and build the right structure for each.
Foundations and Multi-Generational Planning Under the New Rules
Where OBBBA does intersect with offshore structuring is multi-generational succession, an area where offshore foundations often fit better than a standard trust. A permanent $15,000,000 exemption gives families more room to fund durable structures without the annual pressure of a shrinking window, and a foundation’s council-based governance can outlast any single trustee relationship in a way relevant to families planning across multiple generations rather than defending against a single creditor threat. This is a different planning conversation from a Cook Islands Trust built for litigation defense, even though both sit under the same broader offshore planning umbrella.
The Parts of Estate Planning OBBBA Didn’t Simplify
The permanent $15,000,000 federal exemption removes the most urgent piece of estate planning pressure, but several pieces remain that a family with real estate or business interests in a high-tax state still has to address. State estate and inheritance taxes are set independently of the federal exemption, and several states apply their own exemption at $1,000,000 to $7,000,000, meaning a family comfortably under the federal threshold can still owe a meaningful state-level tax depending on residency. The generation-skipping transfer tax exemption, relevant to any structure intended to benefit grandchildren directly rather than passing through a child’s estate first, moved to $15,000,000 alongside the estate and gift exemption but is not portable between spouses the way the estate exemption now is, which means a couple’s GST planning still requires more deliberate structuring than their basic estate tax planning does.
None of this changes the core distinction this article is making. These are still questions about what happens to wealth after death, planned for with wills, revocable trusts, GRATs, and the other standard estate planning toolkit. They remain entirely separate from the question a Cook Islands Trust answers: what happens to wealth if a creditor sues successfully while the settlor is still alive.
The Two Plans Most Clients Actually Need
A client with meaningful wealth and real litigation exposure, a physician, a business owner with personal guarantees, a real estate investor with portfolio-level liability, generally needs an asset protection plan regardless of where the estate tax exemption sits in a given year, because that exposure exists today, not at death. That same client may separately need an estate plan addressing the (now more distant) federal exemption, state-level estate taxes, and multi-generational wealth transfer, and OBBBA changes the shape of that second conversation considerably. Treating the two as one plan, or assuming a comfortable estate tax position means creditor exposure has also gone away, leaves the actual risk unaddressed. Our comparison of offshore trusts vs domestic trusts and our overview of the full offshore asset protection toolkit both start from that same separation.
