Takeaways
- The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, made significant changes affecting estate, gift, income and long-term care planning.
- Beginning in 2026, the federal estate and gift tax basic exclusion amount increased to $15 million per individual, up from $13.99 million in 2025. The federal generation-skipping transfer (GST) tax exemption also increased to $15 million. These higher exemptions may reduce federal estate and gift tax exposure for many families, but they do not eliminate the need for careful estate planning.
- New York’s estate tax exemption is $7.35 million for individuals who die in 2026. Because New York’s estate tax system includes a significant “cliff,” families with estates approaching or exceeding this amount should consider how lifetime gifting and other planning strategies may affect future New York estate tax exposure.
- The OBBBA also made significant changes to Medicaid eligibility, enrollment and financing. The Congressional Budget Office estimates that the Medicaid provisions of the 2025 reconciliation law will reduce federal Medicaid spending by approximately $1.2 trillion from 2026 through 2035 and reduce Medicaid enrollment by millions of people. These changes could affect access to coverage and long-term care planning for some individuals and families.
- Beginning in 2028, federal Medicaid law will impose a $1 million limit on the amount of home equity that can be excluded from certain Medicaid eligibility calculations for individuals seeking long-term care services, subject to the law’s specific rules and exceptions. This makes understanding how home ownership fits into a long-term care plan increasingly important.
- The OBBBA is only one piece of the planning picture. Changes in federal and New York tax law, Medicaid rules, asset values and family circumstances can all affect an estate plan. A periodic review can help identify opportunities to reduce taxes, preserve assets and coordinate estate and long-term care planning.
Overview
At Pierro, Connor & Strauss, we closely monitor changes in federal and New York tax law that affect estate planning, wealth transfer and long-term financial planning. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, made significant changes to the federal estate, gift, generation-skipping transfer and income tax landscape.
For high-net-worth individuals and families, the changes create new planning opportunities as well as important considerations for existing estate plans. The increased federal estate and gift tax exemption, changes to the Qualified Opportunity Zone program and other provisions of the OBBBA may affect how families approach lifetime gifting, wealth transfer, business succession and tax planning.
With federal and New York tax rules operating differently, it is important to evaluate how these changes affect your particular circumstances—and whether your existing estate plan still accomplishes what you intended.
Key Provisions
The OBBBA made several significant changes that may affect estate and tax planning. The most important provisions for high-net-worth families include:
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Higher Federal Estate, Gift and GST Tax Exemptions: Beginning in 2026, the federal estate and gift tax basic exclusion amount increased to $15 million per individual, up from $13.99 million in 2025. The federal generation-skipping transfer (GST) tax exemption also increased to $15 million. These amounts will be adjusted annually for inflation beginning in 2027.
For individuals who made substantial lifetime gifts under the lower 2025 exemption, the increase may create additional exclusion capacity in 2026 and beyond. This can create new opportunities for lifetime gifting and other wealth-transfer strategies.
- Portability Remains Available: OBBBA did not eliminate the federal portability rules. A surviving spouse may still elect to use a deceased spouse’s unused federal estate tax exclusion (DSUE) amount, subject to the applicable rules and timely filing requirements. For a married couple, proper use of portability can potentially preserve up to $30 million of combined federal estate and gift tax exemption in 2026, before considering future inflation adjustments or other factors.
- GST Exemption: The federal GST tax exemption is $15 million per individual in 2026, equal to the federal estate and gift tax basic exclusion amount. Unlike the estate and gift tax exemption, however, GST exemption is not portable between spouses. Careful trust planning may therefore be important for families seeking to maximize multigenerational wealth transfer opportunities.
- Federal Income Tax Rates and Brackets: OBBBA made the individual income tax rates and brackets established under the Tax Cuts and Jobs Act permanent, subject to annual inflation adjustments. This provides greater predictability for income tax planning, including planning involving trusts and other entities.
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Qualified Opportunity Zones: OBBBA made the federal Qualified Opportunity Zone (QOZ) program permanent and established a new framework for QOZ designations beginning in 2027. The first new QOZ designations under the revised program will take effect January 1, 2027.
For qualifying investments made after December 31, 2026, the rules provide for a five-year gain-deferral period and a 10% basis increase after five years, with additional rules applying to qualifying rural opportunity funds.
What These Changes Mean for Your Estate Plan
The increase in the federal exemption means that many families who were previously concerned about federal estate tax may now have considerably more flexibility. But a higher federal exemption does not mean estate planning is no longer necessary.
New York has its own estate tax system and a substantially lower exemption. In addition, estate planning involves much more than federal estate tax: asset protection, business succession, income taxes, capital gains, charitable giving, control of assets, protection for beneficiaries and the management of assets after death all remain important considerations.
For families who completed significant planning before the end of 2025, the new law also presents an opportunity to review whether existing trusts, gifting strategies and other planning techniques should be modified or supplemented in light of the higher exemption.
The tax law has changed, but thoughtful planning remains essential. A review of your estate plan can help determine whether the opportunities created by OBBBA can be incorporated into a strategy tailored to your family’s assets, goals and long-term objectives.
With the federal estate and gift tax exemption now permanently set at $15 million per person for 2026 and indexed for inflation beginning in 2027, families with significant wealth have new opportunities to plan for future appreciation. Depending on your circumstances, strategies may include a Spousal Lifetime Access Trust (SLAT), Dynasty Trust, Grantor Retained Annuity Trust (GRAT), or, for estates that may face estate tax, an Irrevocable Life Insurance Trust (ILIT).
OBBBA also expanded the federal SALT deduction. For 2026, individuals may deduct up to $40,400 in state and local taxes, subject to a phaseout beginning at $505,000 of modified adjusted gross income (MAGI). The higher limitation is scheduled to remain in place through 2029, with inflation adjustments.
The SALT deduction also creates planning opportunities for certain non-grantor trusts, which may be entitled to their own SALT deduction. In appropriate circumstances, carefully structured trusts may provide both tax benefits and opportunities for long-term wealth transfer. Any such strategy should be evaluated in the context of the family’s broader estate and income-tax plan.
Finally, OBBBA’s changes to federal spending, including reductions to projected Medicaid spending and changes to eligibility and enrollment requirements, may have significant implications for families planning for long-term care. Estate, tax and elder law planning increasingly need to work together—not as separate strategies, but as parts of a comprehensive plan.
Yes. This section needs several 2026 corrections, especially the New York exemption, the gifting language, and the “cliff” example. I’d also update the heading and make the federal deduction provisions more concise.
The biggest substantive correction: New York’s 2026 estate tax basic exclusion amount is $7.35 million, not $7.16 million. Also, the statement that lifetime gifts are simply “tax free for both NY and federal estate tax” is too broad because of the federal gift tax system and New York’s three-year add-back rule.
Here’s a cleaner, current version at roughly the same length:
New York Residents: Take Note!
While OBBBA significantly changed the federal estate, gift and generation-skipping transfer (GST) tax landscape, states such as New York remain free to impose their own estate taxes. New York’s estate tax system has a substantially lower exemption than the federal system, making state-level planning particularly important for high-net-worth New Yorkers.
For 2026, the federal estate and gift tax exemption is $15 million per individual, while New York’s estate tax basic exclusion amount is $7.35 million per individual. New York also does not provide federal-style portability of the unused estate tax exemption between spouses. As a result, married couples should carefully consider wills and trusts designed to preserve and utilize each spouse’s New York exemption, including credit shelter or bypass trusts.
New York’s estate tax is further complicated by its well-known “cliff.” If a taxable estate exceeds the New York exclusion amount by more than 5%, the entire exemption is effectively lost and the estate tax is calculated on the full taxable estate, not merely the amount above the exemption. This can create a substantial tax liability from what may appear to be a relatively modest increase in estate value.
New York also has a three-year gift add-back rule. Certain gifts made by a New York resident within three years of death may be included in the New York taxable estate. This makes the timing of lifetime gifts especially important and underscores the value of beginning planning well before a potential estate tax event.
The takeaway? The increased federal exemption may substantially reduce or eliminate federal estate tax exposure for many families, but it does not eliminate New York estate tax concerns. For New York residents with significant assets, credit shelter trusts, lifetime gifting, charitable planning, life insurance and other strategies should be evaluated as part of an integrated state and federal estate plan. A larger federal exemption should not be mistaken for a complete estate tax solution.
OTHER OBBBA TAX PROVISIONS TO KNOW:
- The higher Alternative Minimum Tax (AMT) exemption amounts and phase-out thresholds established under the Tax Cuts and Jobs Act are now permanent and will continue to be adjusted for inflation.
- The expanded standard deduction is permanent. For 2026, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly, with additional amounts available for taxpayers age 65 and older.
- For 2025 through 2028, taxpayers age 65 and older may qualify for an additional $6,000 deduction, subject to income limitations. For married couples, each qualifying spouse may be eligible for the deduction.
- From 2025 through 2028, taxpayers may deduct up to $10,000 of interest on qualifying loans used to purchase new vehicles assembled in the United States. The deduction is available whether or not the taxpayer itemizes and phases out at higher income levels.
- In 2026, taxpayers who do not itemize may deduct up to $1,000 in charitable contributions ($2,000 for married couples filing jointly). For taxpayers who itemize, a new 0.5% of AGI floor applies to charitable deductions, while the 60%-of-AGI limit for certain cash contributions to public charities has been made permanent.
Additional Notable OBBBA Tax Credit Update:
- The Child Tax Credit was made permanent under OBBBA, continuing the enhanced credit originally established by the Tax Cuts and Jobs Act. The maximum credit increased to $2,200 per qualifying child beginning with the 2025 tax year, up from $2,000, and the amount will be adjusted for inflation in 2026.
Yes. I would make several substantive updates here. In particular, the January 1, 2026 work requirement statement is too broad, the New York nursing-home-bed claim is risky/outdated, and the reference to a new home-equity cap needs more precise wording. I’d also avoid saying OBBBA itself necessarily means people will be pushed into nursing homes; that is a possible concern, not a settled outcome.
I’d use this:
Non-Tax Provisions of OBBBA
OBBBA makes significant changes to Medicaid and other federal programs, with the Congressional Budget Office estimating substantial reductions in federal Medicaid spending over the next decade. These changes are expected to affect eligibility, enrollment, financing and certain services, including long-term care. For families who may eventually rely on Medicaid to help pay for care, the changes make advance planning increasingly important.
- Timing matters, and so do state budgets. Many of OBBBA’s Medicaid provisions phase in over several years. In 2026, certain Medicaid expansion adults will face new work or community-engagement requirements, while other eligibility and enrollment changes take effect later. States will play an important role in implementing many of these provisions, so the timing and practical impact will vary from state to state.
- State flexibility means outcomes will vary. Medicaid is jointly funded and administered by the federal government and the states, and states have significant discretion within federal requirements over how programs are structured and which optional services are provided. This is particularly important for home and community-based services (HCBS), which can help older adults and individuals with disabilities remain at home rather than entering a nursing facility. In New York, changes to federal Medicaid funding could place additional pressure on the state budget and on programs serving individuals who need long-term care. The potential impact on home care and other services makes individualized planning especially important.
- Relying on Medicaid for long-term care may become more complicated. Families who have planned around Medicaid eligibility—including a Medicaid “spend-down” strategy—should periodically reassess that plan as federal and state rules evolve. Changes in eligibility requirements, enrollment procedures and covered services could affect when and how Medicaid becomes available.
Reviewing your long-term care strategy now can help identify potential gaps before care is needed. Depending on your circumstances, planning may include irrevocable trusts, Medicaid asset-protection strategies, long-term care insurance, care-at-home planning and other techniques designed to preserve assets while creating greater flexibility in how care is financed.
For families considering Medicaid planning, it is also important to understand the interaction between federal changes and New York’s existing Medicaid rules, including its treatment of home equity and the state’s look-back and transfer rules. OBBBA does not eliminate the need for careful, individualized Medicaid planning; it makes understanding the rules even more important.
Planning for What Comes Next
Estate and long-term care planning can be complex, whether you are building significant wealth, protecting a lifetime of savings or simply trying to make sure you can afford the care you may someday need. The rules continue to evolve, but thoughtful planning can give families more options when circumstances change.
At Pierro, Connor & Strauss, our attorneys bring together estate planning, elder law, Medicaid planning, tax and related disciplines to develop strategies tailored to each family’s circumstances. Whether you are creating a plan for the first time or reviewing an existing plan, we can help you understand how current law may affect your choices—and where additional planning may be appropriate.
Call Pierro, Connor & Strauss at (866) 951-PLAN (866-951-7526) to schedule a consultation.
