USA – ARKANSAS Trends and Developments Contributed by: Rebecca Hurst, Jim Smith and Tori Moore, Smith Hurst PLC
The OBBBA’s Impact on Arkansas Estate and Wealth Planning Federal estate tax exemption amount raised Arkansas is among the majority of states that impose no state-level estate tax, so Arkansans’ only potential estate tax exposure arises at the federal level. Follow - ing enactment of the One Big Beautiful Bill Act (the “OBBBA”) on 4 July 2025, the federal estate and gift tax exemption rose from USD13.99 million to USD15 million, effective 1 January 2026, with annual inflation indexing each year thereafter. An individual may now transfer up to USD15 million free of federal estate tax, and a married couple may shield up to USD30 mil - lion by combining both spouses’ exemptions through appropriate planning. Given the growing population of high net worth individuals and families in the state, this increased exemption has assumed an increas - ingly important role for Arkansas estate planning prac - titioners. No sunset on key TCJA provisions Among the OBBBA’s most significant impacts on estate planning and private wealth practice is its pre - vention of the “sunset,” or expiration of key provisions of the Tax Cuts and Jobs Act (the “TCJA”). Several of those provisions were scheduled to expire at the end of 2025, which would have restored the law in place before the TCJA’s enactment. As that deadline approached, private wealth practitioners were pre - paring clients for a reversion of the federal estate tax exemption to approximately USD7 million and racing to help them lock in benefits before the sunset. The OBBBA instead fixed the exemption at USD15 million, which is more than double what it would have been had the TCJA provisions lapsed without congressional action. The OBBBA also made several TCJA provisions permanent, including the seven tax brackets taxed at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Absent the OBBBA, these would have reverted to the pre-2018 rates of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. With these provisions continued or modified, practition - ers now have a stable framework from which to pursue long-term wealth-protection strategies, free from the pressure to lock in benefits before they disappear. QSBS expansion The OBBBA also enhanced the qualified small busi - ness stock (“QSBS”) exclusions under Section 1202
of the Internal Revenue Code, a change with mean - ingful implications for Arkansans. Section 1202 per - mits noncorporate taxpayers to exclude some or all of the capital gain on qualifying stock if certain conditions are met. For QSBS issued on or after 4 July 2025, the OBBBA strengthened these benefits, including through a tiered gain-exclusion framework that rewards shorter holding periods. Previously, an investor who sold QSBS before satisfying a five-year holding period received no exclusion, while one who held the stock for more than five years paid no capital gains tax on the eligible gain. Now, 50% of the gain is excluded after three years, 75% after four years, and the full 100% exclusion after five years remains in place. In addition, corporations with up to USD75 million in aggregate gross assets are now eligible to issue QSBS, up from the prior USD50 million ceiling, with the USD75 million threshold indexed for inflation beginning in 2027. The OBBBA also raised the maxi - mum excludable gain from USD10 million to USD15 million, subject to annual inflation adjustment. Eligi - ble investors may therefore now exclude the greater of USD15 million or ten times their adjusted basis in the stock, with the ten-times-basis alternative hav - ing already been available before the OBBBA. These changes are especially consequential for Arkansas’s growing entrepreneurial and venture ecosystem, and have made Section 1202 an increasingly prominent feature of business practice in the state. Taken together, these state and federal developments reflect a deliberate effort to position Arkansas as a destination for the preservation and transfer of private wealth. As Northwest Arkansas continues to draw high net worth families and the businesses they build, the state’s modernised trust and asset protection frame - work, reinforced by a favourable federal backdrop, gives practitioners an increasingly robust set of tools for serving them. For families weighing where to anchor their long-term planning, Arkansas now presents a compelling and increasingly competitive option. We would like to thank Grant Smith , University of Arkansas School of Law Class of 2027 , for his assis- tance and research , which was essential to our prepa- ration of this article .
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