Understanding the One Big Beautiful Bill Act's Estate Planning Impacts

Navigating the Changes in Estate Planning

Legislative changes can be daunting, especially when they impact personal areas like estate planning. The One Big Beautiful Bill Act (OBBBA), enacted in July, introduces significant changes. Understanding these changes now presents the opportunity to adapt strategies to benefit from new provisions and prepare for emerging challenges.

Estate and Gift Tax Exemption Increase

Starting January 1, 2026, individuals will be able to pass on $15 million (or $30 million for couples) without incurring federal estate tax—adjusted annually for inflation. This significant increase ends previous uncertainties about phased reductions, offering more room for estate planning.

Fewer Estates Owing Federal Tax

The OBBBA brings the benefit that only about 0.25% of estates will now owe federal estate tax. While this reduces the federal estate tax burden for most, it's crucial to remain cautious of state-level estate taxes that may still apply, necessitating careful planning.

No Other Structural Estate Tax Changes

Beyond the elevated exemption, the fundamental structure of estate, gift, and GST taxes remains unchanged under the OBBBA. The 2017 Tax Cuts and Jobs Act’s provisions are locked in, maintaining consistency in other tax aspects.

Medicare Budget Impact

The delay in implementing key Medicare cost-sharing assistance rules until 2034 and potential $490 billion in cuts could lead to higher out-of-pocket costs and reductions in provider availability. If PAYGO rules trigger these cuts, revisiting Medicare strategies is advisable.

Medicaid Reform and Long-Term Care Planning

With $1 trillion in federal Medicaid cuts, new work or volunteer requirements, and stricter eligibility checks, qualifying for long-term care support could become more challenging. Considering private insurance and asset protection strategies can be crucial steps in addressing these anticipated hurdles.

Social Security Tax Changes

The temporary new deduction of up to $6,000 ($12,000 for couples over 65) for those under specific income thresholds may increase the number of seniors whose Social Security benefits are untaxed. With this provision expiring in 2028 unless renewed, it’s beneficial to optimize tax strategies accordingly.

Seizing the Opportunity for Proactive Planning

While the OBBBA brings complexity, it also creates a window for proactive, strategic estate planning. Reviewing estate documents, long-term care plans, and tax strategies in light of these changes is essential. Reach out to a trusted advisor for guidance tailored to your unique family and financial situation.