by Jonathan A. Nelson
With the passage of H.R. 1, the reconciliation bill also known as the One Big Beautiful Bill Act, a few things look like they will impact estate planning and estate administration. The bill is 870 pages long, including a 12-page table of contents, so this list makes no claim to being comprehensive. Here is what I see immediately:
1. The piece with the biggest direct impact on estate planning is the bill raising the federal estate and gift tax exclusion to $15,000,000.00 per person in 2026 and adjusted to inflation thereafter. This tax is about 40% of everything over that number, so, at least with the clients I tend to deal with, this change should make planning much more predictable for making sure family businesses and farms survive a death. (Section 70106 of the bill.)
2. ABLE accounts, for keeping assets from disqualifying individuals with disabilities from certain means-tested benefits, get a small increase in the amount of contributions which may be made each year, and the bill makes permanent that the amount will be inflation-adjusted. The ability to roll 529 accounts into ABLE accounts is also made permanent. (Sections 70115-17 of the bill.)
3. 529 plans can be used for more elementary and secondary school expenses, and the cap on peripheral expenses (such as computers) is doubled. (Section 70413 of the bill.)
4. Student loan liability which is discharged because of death or disability is now not taxable income. There were some other exclusions for student loan forgiveness already in place which were made permanent, but this new provision can impact how estates are administered. (Section 70119 of the bill.)
5. Although not a new consideration, if there is a family-owned business which might end up in the hands of a foreign owner (such as a surviving spouse who has not become naturalized), special care will continue to be required, with some tax consequences now heightened. (See generally Sections 70311, 70351, 70353).
6. There are a number of other changes to personal and business income taxes which may affect the tax returns filed by a personal representative for a deceased person, a business entity owned by a deceased person, or an estate.
7. Medicaid receives a number of changes to avoid unauthorized expenses; although this is unlikely to impact actual recipients, state Medicaid programs are now required to quarterly de-enroll people who have appeared on the Social Security Death Master File. States will also not be reimbursed for payments they choose to make to persons not lawfully residents, which does stop short of an outright prohibition. Medicaid recipients have already been allowed a certain amount of home equity before it makes them ineligible (so as to not create an additional housing need on top of a medical need), and the bill doubles that amount, consistent with home values generally rising faster than inflation. (Sections 71104, 71108, and 71109 of the bill.)
8. Additional funding is allocated in furtherance of manned missions to Mars. What does this have to do with estate planning? Eventually, missions and tourism on Mars will give way to residency, which will grant a whole new opportunity to reuse or reinvent everything from property rights to inheritance. As anyone who has read Andy Weir’s The Martian may remember, the treaty on space applies maritime law where there is no other governing law, which (unless addressed in future colonization law) could send probate back to the last place of residence on earth -- even if it means administering assets on another planet. If negligence leads to the death, this could lead to the first (so far as I can tell) Death on the High Seas Act suit where the death occurred on land. (Section 40005 of the bill.)
Besides these provisions, there are a number of regulations which will have to be changed over the next few years to reflect and adapt to these changes, but the passage of this bill highlights again the need to ensure estate plan documents and estate administration advice is based on up-to-date legal understanding. If you have any concerns about how the bill may impact your estate planning or business interests, talk with an experienced estate planning attorney.
Virginia attorney Jonathan A. Nelson practices in estate planning, probate, trust administration, business formation, and estate and trust litigation, and brings nearly 20 years of experience resolving conflicts, negotiating settlements, vigorously advocating in the courtroom, and navigating compliance matters. He uses a personal touch and extensive legal knowledge to ensure that the particular needs and interests of each client are reflected in the legal services they receive.
The attorneys of Smith Pugh & Nelson, PLC, offer the experienced counsel, personal attention, and customized legal services needed to address the many complex issues surrounding estate planning, probate, and trust administration. Contact us at (703) 777-6084 to schedule a consultation.