Navigating the One Big Beautiful Bill Act

Whenever a new piece of legislation gets signed into law, especially one as sweeping as the One Big Beautiful Bill Act (OBBBA) enacted in July, it's natural for confusion or concern to follow. These feelings are often magnified when the changes impact areas as sensitive as estate planning. However, by understanding the nuances of OBBBA now, you can pave the way for stronger, more robust long-term planning strategies that not only meet current needs but prepare for what's coming.

Medicaid Reform and Long-Term Care Planning

The OBBBA includes significant reforms, such as $1 trillion in federal Medicaid cuts. New work or volunteer requirements and stricter eligibility checks mean that qualifying for long-term care support might become more challenging. It’s advisable to consider private insurance and asset protection strategies to safeguard against these hurdles.

Estate and Gift Tax Exemption Increase

One notable element of the new law is the increase in estate and gift tax exemption, effective January 1, 2026. Individuals will be able to pass on $15 million, or $30 million for couples, federally tax-free. This increase will be adjusted annually for inflation, ending the period of uncertainty brought by potential phased reductions.

Fewer Estates Owing Federal Tax

The act significantly reduces the number of estates owing federal tax to about 0.25%. While this is a considerable relief, it’s important not to overlook state-level estate taxes, which may still apply and affect your estate planning.

Social Security Tax Changes

The OBBBA introduces a temporary new deduction of up to $6,000 for individuals and $12,000 for couples over 65 who meet specific income thresholds. This provision, set to expire in 2028 unless renewed, could reduce the number of seniors who pay taxes on Social Security benefits.

Medicare Budget Impact

Another aspect to watch is Medicare. Some cost-sharing assistance rules have been postponed until 2034, potentially leading to $490 billion in cuts. If PAYGO rules come into effect, this could result in higher out-of-pocket costs or a reduction in service providers.

No Other Structural Estate Tax Changes

Aside from the higher exemption, the OBBBA brings no structural changes to the estate, gift, and GST taxes. The provisions locked in from the 2017 Tax Cuts and Jobs Act remain intact.

While the OBBBA introduces new complexities, it also opens up opportunities for proactive, strategic estate planning. This is the perfect time to review your estate documents, long-term care strategies, and tax plans. Consider reaching out to your trusted advisor to tailor guidance specific to your unique family and financial situation.