Navigating the One Big Beautiful Bill Act: Estate Planning Insights

Sweeping legislative changes often bring confusion and concern, especially in sensitive areas like estate planning. The One Big Beautiful Bill Act (OBBBA), signed into law in July, introduces significant changes, but understanding them now can lead to stronger long-term planning. This is an opportunity to adapt strategies to benefit from new provisions and prepare for emerging challenges.

The Estate and Gift Tax Exemption sees an increase: Starting January 1, 2026, individuals can pass on $15 million (or $30 million for couples) without federal estate tax, with annual inflation adjustments. This alleviates prior uncertainty around phased reductions.

Medicaid Reform and Long-Term Care Planning are crucial aspects to consider. The $1 trillion in federal Medicaid cuts, alongside new work/volunteer requirements and stricter eligibility checks, may complicate qualifying for long-term care support. Consider private insurance and asset protection strategies.

With Fewer Estates Owing Federal Tax, only about 0.25% of estates will owe federal estate tax. However, remain cautious about state-level taxes that may still apply.

The Social Security Tax Changes introduce a temporary new deduction of up to $6,000 ($12,000 for couples over 65) for those under specific income thresholds. This could increase the number of seniors whose Social Security benefits are untaxed, but the provision expires in 2028 unless renewed.

The Medicare Budget Impact delays key Medicare cost-sharing assistance rules until 2034 and includes possible $490 billion in cuts. Be aware of potential higher out-of-pocket costs and provider reductions if PAYGO rules trigger these cuts.

Importantly, aside from the higher exemption, there are No Other Structural Estate Tax Changes. The structure of estate, gift, and GST taxes remains unchanged, with provisions locked in from the 2017 Tax Cuts and Jobs Act.

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