One Big Beautiful Bill Act: Estate Planning Impacts
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I am sharing an important update following the recent passage of the One Big Beautiful Bill Act, signed into law this July.
This legislation brought significant changes to federal estate planning laws that could impact your long-term plans. With that being said, I wanted to share a quick overview of key changes.
1. Estate and gift tax exemption increased. The exemption for federal estate, gift, and generation-skipping transfer taxes has been permanently increased to $15 million per individual (or $30 million for married couples), adjusted annually for inflation. This change, effective January 1, 2026, eliminates the prior uncertainty around scheduled reductions.
2. Fewer estates are now taxed federally. With this higher threshold, very few estates (roughly 0.25%) will owe federal estate tax. However, state-level estate taxes may still apply, depending on where you live.
3. Medicaid changes may affect long-term care planning. OBBBA also includes major changes to Medicaid that could significantly impact long-term care planning:
Cuts of roughly $1 trillion in federal Medicaid funding over the next decade
Work or volunteer requirements (80 hours/month) and frequent eligibility checks for U.S. citizen recipients
Tighter restrictions on who qualifies for coverage and what services are included
Since Medicaid is often a key part of planning for future nursing home or assisted living costs while protecting assets for future generations, these changes could make it harder to qualify for support. As a result, private long-term care insurance, spend-down strategies, and asset protection planning may become even more critical.
4. Social Security changes may affect estate and retirement planning. The OBBBA introduces a new, temporary tax deduction of up to $6,000 for individuals (or $12,000 for couples ages 65+) with incomes under $75,000 (or $150,000 for couples filing jointly). This deduction applies to all income, not just Social Security, and phases out at higher income levels. The number of beneficiaries who will see no federal tax on their Social Security benefits will increase from 64% to 88% due to an increase in overall deductions. The lowest 20% of seniors, who already pay no income tax, will see no change. This change is set to expire after 2028 unless renewed.
5. Medicare changes may impact health care and planning strategies. The OBBBA prohibits the implementation of two finalized rules until October 2034, which would have offered cost-sharing assistance for low-income enrollees. In addition, if PAYGO budget rules are enforced, up to $490 billion in Medicare spending cuts could take effect by 2034, possibly leading to lower provider reimbursements and higher out-of-pocket costs for beneficiaries.
6. No structural changes to other estate tax laws. Aside from the exemption increase, the basic structure of estate, gift, and generation-skipping transfer taxes remains unchanged. The bill also locks in some 2017 Tax Cuts and Jobs Act provisions — such as the Child Tax Credit, expanded standard deduction, and deduction limits — that may affect broader financial planning.
If you’d like to review your current estate plan or if you have questions about how these changes could affect your family, feel free to contact us. We will I’d be happy to discuss the next steps.