Does the OBBBA exemption replace tax planning

I recently spoke with Emily, and her situation is tragically common. She inherited a substantial estate from her mother, fully expecting to avoid federal estate tax. Her mother had a Will, but it was an outdated, ‘cookie-cutter’ document prepared years ago. Emily was devastated to learn that, despite the increased exemption under the OBBBA, poor planning exposed a significant portion of the estate to tax. She assumed the higher exemption meant no estate tax, and hadn’t considered advanced strategies.

Can the OBBBA Eliminate Estate Tax Liability Altogether?

The OBBBA – or One Big Beautiful Bill Act – did indeed avert the “sunset” provision scheduled for January 1, 2026. This permanently increased the federal estate tax exemption to $15 million per person (indexed for inflation, so effectively higher in 2026). However, thinking this automatically solves all estate tax concerns is a dangerous misconception. While the OBBBA dramatically reduces the number of estates subject to federal tax, it doesn’t eliminate the need for proactive tax planning. It simply raises the bar.

What Happens if My Estate Exceeds the OBBBA Exemption?

If your estate, even with the $15 million+ exemption, still exceeds that amount, the excess is subject to federal estate tax, currently at 40%. The OBBBA merely defines the threshold; it doesn’t change the tax rate. More importantly, even if your estate falls under the federal exemption, you may still face California state estate tax, or potential property tax repercussions under Proposition 19.

How Does My CPA Background Help With Estate Planning?

As both an Estate Planning Attorney and a CPA with over 35 years of experience, I bring a unique perspective to these issues. Many attorneys understand the legal mechanics of Trusts and Wills, but lack the tax expertise to fully optimize a client’s estate. I routinely advise clients on strategies to minimize both federal and California estate taxes, leveraging my deep understanding of stepped-up basis rules and valuation. For example, understanding the implications of Proposition 19 on inherited real property is critical. Under Prop 19, heirs can only keep a parent’s low property tax base if they move into the home as their primary residence within one year and the home’s value is within specific limits. Failing to plan around this can result in a significant property tax increase.

What About Assets Beyond Cash and Investments?

Estate planning isn’t just about liquid assets like cash and stocks. It encompasses all of your property – real estate, business interests, digital assets, and more. If you have a business, proper structuring can be crucial. As of March 2025, domestic U.S. LLCs are exempt from mandatory BOI reporting under the Corporate Transparency Act; however, executors managing foreign-registered entities must still file updates within 30 days to avoid fines of $500/day. Furthermore, without specific RUFADAA language (Probate Code § 870) in your Trust or Will, service providers like Coinbase and Google can legally deny your executor access to your digital assets. This can leave valuable assets inaccessible.

What if I Only Have a Will?

A Will is a good start, but it’s often not enough, especially for larger estates. If combined ‘probate assets’ (excluding the AB 2016 residence) exceed $208,850 (the threshold effective April 1, 2025), they are subject to formal probate; a Will alone does not allow you to bypass this limit. Furthermore, if you own a primary residence, we need to determine if it qualifies for the simplified ‘Petition for Succession’ under AB 2016 (Probate Code § 13151). For deaths on or after April 1, 2025, a primary residence valued up to $750,000 qualifies for a Petition, but this is not an affidavit. It still requires a Judge’s Order. The Small Estate Affidavit is strictly for real property under $69,625, like timeshares or vacant land.

How do California courts decide whether a will reflects true intent or creates ambiguity?

In California, a last will and testament is reviewed under probate standards that focus on intent, capacity, and execution. Clear drafting reduces ambiguity, limits misinterpretation, and helps families avoid unnecessary conflict during estate administration.

To ensure the will functions as intended, the executor must understand their fiduciary obligations, while the family should be prepared for the court supervision required to enforce the document.

For California residents, understanding how intent, authority, and compliance interact is one of the most effective ways to protect family harmony and estate integrity. A will that anticipates probate scrutiny is far more likely to be honored as written and far less likely to become the source of unnecessary conflict.

Resources for Asset Management & Transfer

• Property Tax Reassessment: California State Board of Equalization (Prop 19)
  This page details the “Base Year Value Transfer” rules. It explains that heirs can only avoid a property tax reassessment if the inherited home becomes their primary residence and a claim is filed within one year of the date of death.
• Real Estate Probate (AB 2016): California Probate Code § 13151 (Petition for Succession)
  The specific statute for the AB 2016 process. It outlines the requirements for using a court-approved “Petition” (not an affidavit) to transfer a primary residence worth $750,000 or less (gross value) for deaths occurring after April 1, 2025.
• Small Estate Affidavit: California Probate Code § 13100 (Personal Property)
  Access the statutory language for the “Small Estate Affidavit.” This procedure is strictly for Personal Property (cash, stocks, vehicles) and is limited to estates with a total value of $208,850 or less (effective April 1, 2025).
• Federal Estate Tax: IRS Estate Tax Guidelines
  The authoritative federal resource for estate valuation. It reflects the 2026 exemption increase to $15 million per person established by the One Big Beautiful Bill Act (OBBBA), which is critical for high-net-worth asset planning.
• Unclaimed Assets: California State Controller – Unclaimed Property
  The primary portal for executors and heirs to search for “lost” assets—such as forgotten bank accounts, uncashed dividends, and insurance benefits—that have been remitted to the State of California for safekeeping.
• Business/LLC Compliance: FinCEN – Beneficial Ownership Information (BOI)
  The official portal for corporate transparency reporting. While many domestic U.S. LLCs received exemptions in 2025, executors managing foreign-registered entities or specific non-exempt structures must still consult this resource to ensure compliance.