NEWS & INSIGHTS

As you may have heard, President Trump signed the One Big Beautiful Bill Act (“OBBBA”) on July 4, 2025, which reflects sweeping changes in areas affecting small businesses, investments, manufacturing and taxes, as well as many others.  Future articles will address the material provisions of OBBBA, but for the purpose of this one, we will focus on what this legislation means for you and your estate plan.

Highlights

• Permanently extends most tax cuts from the 2017 Tax Cuts and Jobs Act (“TCJA”)
• Significant cuts to Medicaid, SNAP benefits
• Expands and introduces new tax-advantaged investment accounts

Extension of the 2017 TCJA

For estate planning clients, the most significant element of OBBBA is the extension of 2017 TCJA’s increased federal estate and gift tax exemption (“lifetime exemption”).

What would happen if the bill did not pass?

If OBBBA did not pass, the exemption was set to sunset at the end of 2025, potentially cutting the threshold in half—from $13.99 million per individual ($27.98 million for married couples) in 2025 down to approximately $7 million in 2026 ($14 million for married couples).

How does this change under the new bill?

An individual’s lifetime exemption will remain at elevated levels through at least 2035, allowing high-net-worth individuals to continue transferring significant wealth without triggering federal estate tax or gift tax. As noted above, an individual’s lifetime exemption will be $15 million in 2026 and $30 million for married couples.

Practice Tip: You should review your estate planning documents if they are structured around pre-TCJA lifetime exemption amounts. 

Charitable Deductions for Individuals & Married Couples

Under OBBBA, there are three (3) changes to how taxpayers take charitable deductions on personal income tax returns:

1. Deductions for Cash Donations — Itemizers and non-itemizers may deduct cash donations to a charity up to $1,000 for single filers and $2,000 for married couples filing jointly.
2. Cap on Tax Benefits — Tax benefits for itemized charitable deductions is now capped at 35%.
3. Income Floor — There is now an income floor of 0.5% for charitable giving before taxpayers can claim an itemized deduction.

Social Security Benefits

Similar to the TCJA, Social Security benefits are partially subject to income tax on up to 85% of benefits under OBBBA depending on a taxpayer’s income.

A new $6,000 deduction was added for those aged 65 and older per taxpayer. This senior deduction phases out at a 6% rate when a taxpayer’s income exceeds $75,000 for single filers and $150,000 for joint filers.

No Taxes On Tips and Overtime (Sort of)

One provision of the bill that garnered more media attention than others centered around Trump’s campaign promise to make tips and overtime wages non-taxable with a few caveats. While this change may not affect estate tax directly, it could alter income patterns, savings habits, and retirement projections for beneficiaries.

Medicaid & SNAP Cuts May Impact Long-Term Care Planning

Unfortunately, not all of the changes are taxpayer friendly. The bill offsets its tax cuts in part by slashing federal spending on programs like Medicaid and SNAP (food assistance)—to the tune of $1.3 trillion, according to the Congressional Budget Office.

For families with aging loved ones or special needs dependents, this could mean:

• Stricter Medicaid eligibility rules
• Reduced access to long-term care funding
• Increased pressure on families to self-fund nursing home care

Practice Tip: Now more than ever, long-term care planning, irrevocable trusts, and asset protection strategies are critical tools. If you’ve been postponing this part of your estate plan, it’s time to act.

Trump Accounts

“Trump Accounts,” the new tax-deferred investment option for children allows for contributions from parents, relatives, employers, and other entities. Contributions are capped at $5,000 annually, and employer contributions have a separate $2,500 limit. To be eligible, the child must be a U.S. Citizen with a Social Security number. An account for each eligible child born from 1/1/2025 to 12/31/2028 will be automatically opened, and a $1,000 contribution made by the federal government will be deposited.

529 Accounts

The scope of the tax-exempt distributions via 529 accounts has been expanded. The range of eligible expenses now includes: tuition, curriculum and curricular materials, books, online educational materials, tutoring, educational classes outside the home, fees for standardized tests, advanced placement exams, college admission exams, dual enrollment fees, educational therapies for students with disabilities provided by licensed professionals, and qualified post-secondary credentialing expenses.

Additionally, the annual limit for distributions specifically for K-12 expenses has been increased from $10,000 to $20,000.

Who benefits most from the new bill?

According to the Penn Wharton Budget Model, wealthier households stand to gain the most under the bill, while low-income households may lose access to critical benefits. The disparity underscores the importance of proactive, values-based estate planning that considers not only taxes but the legacy you leave behind.

Call to Action — What Should You Do Now?

The following checklist should help you determine what actions you should take now:

• Review your existing estate plan in light of the extended TCJA exemptions
• Reassess your gifting strategy and use of trusts
• Update your planning if you anticipate long-term care or Medicaid needs
• Talk with your tax professional about taking advantage of the temporary SALT deduction
• Discuss how income changes for your heirs (e.g., tip/overtime exemptions) could impact your overall plan

While the “Big Beautiful Bill” was expeditiously enacted, your estate planning deserves careful consideration and thoroughness. If you haven’t updated your estate plan in the last 12–18 months, now is the time to do so. Contact our office to schedule a consultation and ensure your plan aligns with the new tax landscape.

Edward Twomey is a Partner in the Estates and Trusts team and leads the Elder Law team at The Lynch Law Group. Nicholas Scholle is an Associate Attorney at The Lynch Law Group where he is a member of the Estates & Trusts, Elder Law, and Business Succession Planning Practice Groups. For more information related to estate planning matters, please contact Ed or Nick via our contact form or by phone at 724-776-8000.