Sara Dahlen | Jul 28 2025 14:00
The mere mention of sweeping legislative changes like the One Big Beautiful Bill Act (OBBBA) often brings confusion and concern, especially in sensitive areas such as estate planning. However, understanding these changes now can pave the way for robust long-term planning. With the OBBBA signed into law this July, there's a golden opportunity to adapt strategies to harness new provisions and prepare for emerging challenges.
Estate and Gift Tax Exemption Increase
Starting January 1, 2026, individuals will enjoy an increased exemption, allowing them to pass on $15 million (or $30 million for couples) without federal estate tax liability. This change, which includes annual inflation adjustments, has quashed prior uncertainties concerning phased reductions, offering more clarity and planning opportunities.
Medicaid Reform and Long-Term Care Planning
The OBBBA introduces $1 trillion in federal Medicaid cuts, coupled with new work or volunteer requirements and stricter eligibility checks. Such reforms could complicate qualifying for long-term care support. It's prudent to consider private insurance options and asset protection strategies to safeguard against potential service gaps.
Fewer Estates Owing Federal Tax
Under the new legislation, only about 0.25% of estates will owe federal estate tax. Yet, it's important to remain vigilant about possible state-level taxes that could still apply, ensuring a comprehensive approach to estate tax planning.
Social Security Tax Changes
A noteworthy provision of the OBBBA is the 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 remain aware that this provision will expire in 2028 unless renewed.
Medicare Budget Impact
The delay of key Medicare cost-sharing assistance rules until 2034 could pose financial challenges, potentially leading to $490 billion in cuts. This may result in higher out-of-pocket costs and provider reductions if PAYGO rules trigger these cuts, urging a reevaluation of healthcare budgeting and planning.
No Other Structural Estate Tax Changes
Aside from the heightened exemption, the OBBBA leaves the structure of estate, gift, and GST taxes unchanged, with provisions locked in from the 2017 Tax Cuts and Jobs Act remaining intact. This consistency offers a stable backdrop for future planning strategies.
While the OBBBA introduces complexities, it also opens the door for proactive, strategic estate planning. Now is the perfect moment to review your estate documents, long-term care plans, and tax strategies. Don't hesitate to reach out to a trusted advisor for personalized guidance tailored to your unique family and financial situation.
