Tax Planning Under the Big Beautiful Bill: What Changed?

The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, represents one of the most comprehensive overhauls of tax and estate planning law in recent memory. Its provisions reach across multiple areas—estate taxes, income taxes, Medi-Cal eligibility, and deductions—redefining the way advisors should approach client conversations and strategies.

For advisors, this legislation is both an opportunity and a challenge. While many clients will benefit from higher exemptions and expanded deductions, others—particularly those counting on Medi-Cal for long-term care—now face new risks. Understanding the nuances of these changes is essential to guiding clients effectively.

Major Changes Under the OBBBA

Estate Taxes

• The federal estate tax exemption has been raised to $15 million per person ($30 million per couple) and made permanent, indexed annually for inflation.
  
• The elimination of the 2026 “sunset” provides certainty, allowing families to plan without fear of abrupt reversals in exemption levels.
  

Income Taxes

• The scheduled 3% increase in income tax brackets for 2026 has been eliminated.
  
• The standard deduction has been increased, ensuring more income is shielded from taxation and fewer families are affected by bracket creep.
  

Medi-Cal in California

• With federal Medicaid funding reduced, California has reinstated strict asset tests, limiting applicants to $2,000–$130,000 in countable assets.
  
• Retirement accounts, brokerage accounts, annuities, and additional properties may disqualify seniors from eligibility.
  
• Adults under 65 who rely on Medicaid may also face new work requirements.
  

SALT Deduction

• The State and Local Tax (SALT) deduction cap has been raised from $10,000 to $40,000.
  
• This change disproportionately benefits families in high-tax states, restoring meaningful relief for property owners and professionals.
  

Implications for Planning

The OBBBA introduces a more stable tax environment at the federal level but raises new questions at the state level. Advisors should be prepared to guide clients in several critical areas:

1. Estate Planning Adjustments

• Families who rushed into complex trusts or gifting strategies to “beat the sunset” should revisit those structures. Some may now be unnecessarily complicated, creating administrative burdens without providing tax benefits.
  
• With larger exemptions, clients can focus more on family goals, business succession, and charitable strategies, rather than strictly tax avoidance.
  

2. Income Tax Strategies

• With bracket stability and higher standard deductions, advisors should encourage clients to reassess withholding, quarterly payments, and charitable giving strategies.
  
• For clients who accelerated income recognition or donations in anticipation of higher taxes, it may be time to recalibrate.
  

3. Long-Term Care Planning

• The reinstatement of Medi-Cal asset tests creates new risks for clients with even moderate savings or multiple properties. Advisors should flag these issues and work collaboratively with elder law attorneys to implement asset protection strategies early.
  
• Conversations around long-term care insurance, hybrid policies, or alternative funding mechanisms should be prioritized.
  

4. Real Estate and the SALT Deduction

• The expanded deduction improves after-tax returns on property holdings, creating opportunities for real estate investors and homeowners in high-tax states.
  
• Advisors should evaluate whether clients should revisit itemization versus the standard deduction, or reconsider the timing of property tax payments to optimize savings.
  

The Advisor’s Role: From Urgency to Strategy

The OBBBA fundamentally shifts the advisor’s role from helping clients “race against deadlines” to building deliberate, forward-looking strategies. The pressure to act before exemptions vanished is gone. In its place is an opportunity for advisors to provide greater clarity, simplify structures, and align financial and estate goals with clients’ values.

The Takeaway

The OBBBA provides clarity and relief in some areas, but it also introduces new challenges—particularly around Medi-Cal and long-term care. For advisors, the key is to reframe planning conversations:

• Simplify outdated tax-driven structures.
  
• Reassess income and charitable strategies.
  
• Collaborate with estate planning and elder law counsel to protect client wealth.
  

Use this legislative shift as a natural touchpoint to re-engage clients. A comprehensive review of estate plans, tax strategies, and long-term care funding will not only ensure compliance with the new rules but also reinforce your role as a trusted, proactive advisor.