How OBBBA Changes Estate Planning

Emily just received devastating news. Her father, a successful local businessman, passed away unexpectedly last month. He had a meticulously crafted trust, updated regularly…or so she thought. The problem? The original estate plan was built around projections for the 2024 federal estate tax exemption. Now, with the sunset looming, Emily’s inheritance, and the future of the family business, is at risk of a tax bill exceeding $800,000 – a cost that could dismantle years of work. This situation, sadly, is becoming far too common as clients cling to outdated assumptions.

As an Estate Planning Attorney and CPA with over 35 years of experience, I’ve seen countless estate plans fail not because of inherent flaws in the document, but because they weren’t proactively adjusted to reflect changing tax laws. The One Big Beautiful Bill Act (OBBBA) offers a significant, and permanent, change to the landscape, but only if we act decisively now. For far too long, estate planning focused on if the exemption would decrease in 2026; OBBBA eliminates that “if.”

What Does OBBBA Actually Mean for My Clients?

The most crucial takeaway is this: the OBBBA permanently established the Federal Estate Tax Exemption at $15 million per person ($30 million for couples) effective Jan 1, 2026. This eliminates the “2026 Sunset” fear, though the top tax rate remains at 40% for assets exceeding this permanent threshold, which is now indexed annually for inflation. What this means in practice is that while a larger portion of estates will remain outside the reach of federal estate tax, strategic planning is more vital than ever. We’re no longer scrambling to avoid a potential drop to half the exemption; we’re now focused on maximizing the benefits of a substantial, fixed exemption amount.

How Does My CPA Background Help with OBBBA Planning?

Many estate planning attorneys lack a deep understanding of the tax implications beyond simply avoiding estate tax. As a CPA, I bring a crucial perspective, particularly regarding the “step-up in basis.” This means inherited assets receive a basis equal to their fair market value at the date of death, potentially eliminating significant capital gains taxes when those assets are sold. Proper valuation is paramount, and I leverage my accounting expertise to ensure clients receive the maximum step-up benefit, minimizing future tax liabilities. It’s not just about avoiding the estate tax; it’s about minimizing the total tax burden across generations.

What About Proposition 19 and the Impact on Real Estate?

While OBBBA addresses federal estate taxes, California’s Proposition 19 adds another layer of complexity. Under Proposition 19, heirs only keep a parent’s low property tax base if they move into the home as their primary residence within one year. Critically, for 2026, the tax-free ‘basis boost’ is capped at $1,044,586 over the original taxable value; any value exceeding this adjusted cap results in a partial reassessment even if the child moves in. This means careful planning is necessary to coordinate real estate transfers with both Proposition 19 and the broader estate plan. We need to analyze potential reassessments and factor those costs into the overall strategy.

What About Clients with Businesses – LLCs and Corporations?

The Corporate Transparency Act (CTA) introduces significant reporting requirements for small businesses. Under the Corporate Transparency Act (CTA), all non-exempt small businesses must maintain active BOI Reports with FinCEN. Upon the death of a member, the estate or successor has exactly 30 days from the date the estate is settled to file an updated report; failure to meet this window triggers non-waivable fines of $500 per day. This is a frequently overlooked issue, and failure to comply can result in substantial penalties. Incorporating CTA compliance into the estate planning process is now essential, particularly for business owners. Furthermore, the valuation of business interests within an estate can be complex, demanding a sophisticated understanding of business appraisal methods.

What About Digital Assets and Access Rights?

The rise of digital assets – cryptocurrency, online accounts, digital photos – presents unique challenges. Per the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), custodians like Apple or Google are legally prohibited from granting executors access to the content of emails or private messages without ‘explicit written direction’ in the will or trust. Metadata (the ‘catalog’) may be accessible, but the private content remains locked without this specific legal trigger. Clients need to proactively address these assets and provide clear instructions regarding access and control.

How do probate courts in California evaluate intent when a will is challenged?

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.

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.

Controlling Legal Standards Governing California Estate and Asset Transfers

• Probate & Court Procedure:
  California Courts – Wills, Estates, and Probate
  The official judicial branch guide for navigating the probate process; it provides updated 2026 checklists for determining if an estate qualifies for “Summary Probate” under the $208,850 personal property limit or the $750,000 primary residence threshold (AB 2016).
• Property Tax Reassessment (Prop 19):
  California State Board of Equalization (Prop 19)
  The definitive resource for understanding the “Parent-to-Child” reassessment exclusion; it outlines the strict one-year deadline for heirs to move into an inherited home as their primary residence to maintain the parent’s low property tax base.
• Advance Healthcare Planning:
  California Attorney General – Advance Health Care Directive
  Provides the official California statutory form and legal guidelines for appointing a health care agent; this resource emphasizes the necessity of combining a medical power of attorney with a HIPAA release to ensure doctors can communicate with family during an emergency.
• Federal Estate & Gift Tax:
  IRS Estate Tax Guidelines
  The authoritative federal portal for estate and gift tax reporting; this page reflects the 2026 “OBBBA” permanent exemption of $15 million per person, effectively replacing the previously scheduled Tax Cuts and Jobs Act (TCJA) sunset.
• Digital Asset Access (RUFADAA):
  California RUFADAA Law (Probate Code §§ 870-884)
  Access the full statutory text of the Revised Uniform Fiduciary Access to Digital Assets Act; it explains why executors are legally barred from accessing encrypted accounts, email, or crypto-wallets unless the decedent provided explicit “prior consent” in their estate plan.