One Big Beautiful Bill Act: Navigating Estate Planning Changes
Understanding the Impact on Estate Planning
The introduction of the One Big Beautiful Bill Act (OBBBA) has left many individuals concerned about its effects on estate planning. While changes can seem intimidating, understanding and adapting to these adjustments can lead to stronger planning in the long term. Let's explore the key points and considerations that arise with the implementation of OBBBA.
Estate and Gift Tax Exemption Increase
Starting January 1, 2026, the estate and gift tax exemption will rise, allowing individuals to pass on $15 million, or $30 million for couples, without facing federal estate tax. This change, with annual inflation adjustments, resolves prior uncertainties about phased reductions. While only about 0.25% of estates will owe federal estate tax, be mindful of state-level taxes that may still apply.
Medicaid Reform and Long-Term Care Planning
With $1 trillion in federal Medicaid cuts and new work/volunteer requirements, qualifying for long-term care support has become more challenging. Consider exploring private insurance options and asset protection strategies to help navigate these changes and ensure adequate care in the future.
Social Security Tax Changes
A temporary new deduction allows seniors under specific income thresholds to deduct up to $6,000 ($12,000 for couples over 65) from their Social Security taxes. This provision, however, is set to expire in 2028 unless renewed. For now, it presents an opportunity for many seniors to have their Social Security benefits remain untaxed.
No Other Structural Estate Tax Changes
Aside from the increased exemption, the structure of estate, gift, and GST taxes remains unchanged. The provisions locked in from the 2017 Tax Cuts and Jobs Act continue to apply, providing some stability amidst the broader modifications.
Medicare Budget Impact
Key Medicare cost-sharing assistance rules have been delayed until 2034, and potential cuts of $490 billion loom on the horizon. If triggered by PAYGO rules, these cuts may result in higher out-of-pocket costs and reduced provider availability. It is essential to stay informed and prepared for these potential adjustments.
Embracing Strategic Estate Planning
While the OBBBA introduces new complexities, it also offers an opportunity for proactive, strategic estate planning. Review your estate documents, long-term care plans, and tax strategies in anticipation of these changes. It's wise to consult a trusted advisor to tailor guidance to your unique family and financial circumstances. By embracing these changes, you can secure a more stable financial future.
