What changed with the estate exemption under OBBBA?

The federal estate and gift tax exemption had been scheduled to fall sharply at the end of 2025 when earlier provisions expired. That reduction did not occur — the higher exemption level was extended and indexed rather than allowed to sunset, which removed the deadline many families had been planning against. The practical effect is that the pressure to act by a specific date is gone, while the underlying reasons to plan are not. Families who deferred large gifting decisions because of the deadline now have room to make them on their own timeline, and families in states with their own estate taxes still face thresholds well below the federal one.

What are the four conversations every family should have?

What the estate contains and where the documents live. What the parents' intentions actually are, in their own words, rather than as inferred from a trust. What is expected of the next generation — whether an inheritance comes with assumptions about stewardship, family enterprise, or philanthropy. And who does what when a parent dies or becomes unable to act, so the roles are known before they are needed. None of these requires disclosing every number, and all of them are easier to have while everyone is healthy.

What is the Prop 19 family-home trap?

California's Proposition 19 narrowed the circumstances in which a child can inherit a parent's home without triggering reassessment of its property-tax value. Where a family home once passed with its assessed value largely intact, the exclusion now applies only in limited circumstances and is capped, meaning many inherited California properties are reassessed at current market value. For families whose long-held home carries a low assessed value, the resulting property tax can exceed what the heirs are able or willing to carry — which turns a home the parents intended to keep in the family into a property that gets sold. It is worth knowing which category your situation falls into well in advance.

How do inherited IRA rules work for non-spouse beneficiaries?

Most non-spouse beneficiaries must now empty an inherited retirement account within ten years of the original owner's death, rather than stretching distributions across their own lifetime. Certain beneficiaries are treated differently, including surviving spouses, minor children of the account owner, disabled or chronically ill individuals, and beneficiaries close in age to the deceased. Where the original owner had already begun required distributions, annual distributions may also be required during the ten-year period. The planning consequence is that a large tax-deferred account often lands on heirs during their highest-earning years, compressed into a decade — which is a reason to consider whether some of that tax is better paid by the parents, at their rates, while they are living.

How should year-end giving be structured?

Annual exclusion gifts do not carry forward — the capacity to make them expires each year and is gone. For families with a long-term transfer objective, using that capacity consistently moves meaningful value out of the estate over time without touching the lifetime exemption. Beyond that, the mechanics matter: gifts of appreciated securities are treated differently from cash, direct payments of tuition and medical expenses to the institution are handled separately from the annual exclusion, and gifts made near year-end need to be completed rather than merely initiated. Coordinating the timing with the year's overall tax picture is a conversation to have in the fall, not in the last week of December.

How do you coordinate with my estate attorney?

The attorney drafts the documents and advises on the law; we do not do either. What we do is make sure the plan and the assets match — that beneficiary designations line up with the trust, that accounts are titled the way the documents assume, that the attorney knows what the balance sheet actually looks like, and that changes in the plan reach the documents rather than sitting in a file. Our annual cycle includes collaboration meetings for exactly this reason, because the most common estate planning failure is not a badly drafted document; it is a well-drafted document that no longer matches the assets it governs.

Pillar

Estate & Wealth Transfer

Documented succession of capital — across generations or across mandates — coordinated with attorneys and accountants so structure and intention stay aligned.

Almost every estate plan that fails does so for one of two reasons, and neither is a drafting error.

The first is that the documents no longer match the assets. A trust is drafted carefully, and then an account is opened and never retitled, a beneficiary form is completed at a new employer and never revisited, a property is acquired and never funded into the trust. The documents describe an estate that no longer exists.

The second is that the intention behind the documents was never communicated. The structure works exactly as written, and the family discovers what the parents meant only after there is no one left to ask.

Both are preventable. Neither is prevented by legal drafting alone, which is why estate work sits inside the planning relationship rather than being handed off to it.

The Via Luce point of view

Estate planning is usually described as a document problem and is actually a coordination problem. The will, the trust, the beneficiary designations, the account titling, the business agreements, and the insurance policies each control a portion of what happens, and they are typically created at different times by different people who have never compared notes.

Our role is not to draft any of it. Your attorney does that, and your CPA advises on the tax. Our role is to hold the picture together — to know what the documents say, to check that the assets are arranged the way the documents assume, and to raise it when a change on one side has not reached the other.

The second half of the work is less technical and matters more over a long horizon: making sure the intention behind the plan is known to the people it concerns. Wealth that arrives without context tends to be handled differently from wealth that arrives with it, and the difference shows up a generation later.

Core concepts

The documents are the easy part

A competent attorney can draft a sound estate plan in weeks. Keeping it accurate takes decades, and that maintenance is where plans quietly break.

Beneficiary designations are the most common failure point, because they operate outside the will entirely. A retirement account, an insurance policy, or a transfer-on-death registration passes to whoever is named on the form, regardless of what the will or trust says. A designation completed at a job two employers ago, naming a person who is no longer in the picture, overrides the carefully drafted document sitting in a drawer.

Titling is the second. A trust only governs what has been transferred into it. Assets acquired after the trust was signed — a brokerage account, a rental property, an interest in a new venture — are frequently left outside it, which can mean the estate goes through exactly the process the trust was created to avoid.

Neither problem is difficult to fix. Both require someone to check periodically, against a current picture of the assets. That is a planning function, not a legal one.

Exemption planning without a deadline

For several years, families with large estates planned against a scheduled reduction in the federal exemption. That reduction did not happen, and the higher exemption level was extended. The deadline that had been driving urgency is gone.

What has not changed is the underlying logic. Gifting assets during life removes not only the value transferred but all of its future growth from the estate — which means the earlier a transfer is made, the more it accomplishes, independent of where the exemption sits. Several states impose their own estate or inheritance taxes at thresholds well below the federal level, so a family that is comfortably under the federal exemption may not be under their state’s. And a large exemption is a matter of current law rather than a permanent feature.

The practical implication is that the calculus moved from urgency to intention. Families who deferred a decision because they were waiting for the deadline now get to make it on the merits: whether transferring assets serves what they actually want, whether the next generation is ready to receive them, and what the family gives up in flexibility by moving assets out of reach.

The tax-deferred account is an estate problem

A large traditional retirement account is one of the least efficient assets to leave to children. It carries embedded income tax that the heirs pay at their rates, and most non-spouse beneficiaries must now withdraw the balance within ten years — which typically lands during the heirs’ peak earning years, in their highest brackets.

That changes the arithmetic on Roth conversions for families with a transfer objective. Converting during the parents’ lifetime means paying tax at their rate rather than the heirs’ — often lower, particularly in the years after employment income ends and before required distributions begin. It also removes the tax paid from the estate. Whether the trade is worthwhile depends on the rate comparison and on how long the assets are expected to remain invested, but it is a materially different question when the account is destined for heirs rather than for the account owner’s own spending.

The same logic runs the other way for charitable intentions. Assets that carry embedded income tax are usually the most efficient ones to leave to a charity, which pays none of it, and the least efficient to leave to family.

The California questions

State-level rules can override an otherwise sound plan. In California, the most consequential is Proposition 19, which narrowed the ability to pass a family home to children without reassessing it for property-tax purposes. A home held for decades at a low assessed value may be reassessed at current market value when inherited, and the annual carrying cost can rise enough that the heirs sell a property the parents assumed would stay in the family.

Where that applies, the planning question is practical rather than legal: does the family actually want to keep the property, and if so, is there a source of liquidity that makes carrying it feasible? The answer is often that selling is the right outcome — but it should be a decision rather than a discovery.

Preparing heirs, not just assets

The technical plan determines what is transferred. It has very little to do with what happens next.

Families that transfer wealth well tend to do a few unglamorous things. They talk about money before the transfer, in terms the next generation can act on. They are explicit about intention — what the wealth is for, and what if anything is expected of the people receiving it. They give the next generation some experience with responsibility while the parents are still available to discuss it. And they name roles clearly, so the person who will serve as trustee or executor learns it in a conversation rather than in a lawyer’s office.

None of this requires full disclosure of every number, and none of it is a substitute for the documents. It is the difference between a plan that transfers assets and one that transfers assets and intention together.

Liquidity and the equalization problem

Estates concentrated in illiquid assets — an operating business, real estate, farmland, a partnership interest — carry a problem that estates of marketable securities do not. Obligations arrive on a schedule the assets cannot meet. Taxes may be due before anything can be sold, expenses continue during administration, and heirs who need income have to wait for a transaction that may take a year or more to arrange.

The result is forced selling at a moment when everyone involved knows the seller has no choice. That is the worst position from which to transact, and it is entirely foreseeable years in advance.

The related problem is equalization. When one child works in the family business and another does not, or when the estate consists largely of a single property, dividing it fairly and dividing it equally become different objectives. Leaving the business to all the children is a common instinct and frequently a poor outcome — it makes the sibling who runs it accountable to siblings who do not, with no mechanism for resolving disagreement.

Both problems have the same category of answer: a deliberate source of liquidity outside the illiquid asset, whether that is a reserved portion of the portfolio, an insurance arrangement structured with the attorney, or a funded agreement among the owners. What matters is that the arrangement exists and is sized against a current view of what the obligations will be — not a figure calculated when the business was a third of its present value.

How this gets done

Estate work runs on the same annual cadence as the rest of the planning relationship, with a defined place for collaboration meetings alongside your attorney and CPA. Beneficiary designations and titling get checked against the current documents. Changes in the family, the balance sheet, or the law get raised while there is time to respond. And the conversations that families tend to postpone get a place on the agenda, which is usually all they need.

No process assures a particular result, and the law will keep moving. What a documented, regularly reviewed plan aims to do is make sure that when it is needed, it still describes the estate that exists and the intention behind it.

Frequently asked questions

What changed with the estate exemption under OBBBA?: The federal estate and gift tax exemption had been scheduled to fall sharply at the end of 2025 when earlier provisions expired. That reduction did not occur — the higher exemption level was extended and indexed rather than allowed to sunset, which removed the deadline many families had been planning against. The practical effect is that the pressure to act by a specific date is gone, while the underlying reasons to plan are not. Families who deferred large gifting decisions because of the deadline now have room to make them on their own timeline, and families in states with their own estate taxes still face thresholds well below the federal one.
What are the four conversations every family should have?: What the estate contains and where the documents live. What the parents' intentions actually are, in their own words, rather than as inferred from a trust. What is expected of the next generation — whether an inheritance comes with assumptions about stewardship, family enterprise, or philanthropy. And who does what when a parent dies or becomes unable to act, so the roles are known before they are needed. None of these requires disclosing every number, and all of them are easier to have while everyone is healthy.
What is the Prop 19 family-home trap?: California's Proposition 19 narrowed the circumstances in which a child can inherit a parent's home without triggering reassessment of its property-tax value. Where a family home once passed with its assessed value largely intact, the exclusion now applies only in limited circumstances and is capped, meaning many inherited California properties are reassessed at current market value. For families whose long-held home carries a low assessed value, the resulting property tax can exceed what the heirs are able or willing to carry — which turns a home the parents intended to keep in the family into a property that gets sold. It is worth knowing which category your situation falls into well in advance.
How do inherited IRA rules work for non-spouse beneficiaries?: Most non-spouse beneficiaries must now empty an inherited retirement account within ten years of the original owner's death, rather than stretching distributions across their own lifetime. Certain beneficiaries are treated differently, including surviving spouses, minor children of the account owner, disabled or chronically ill individuals, and beneficiaries close in age to the deceased. Where the original owner had already begun required distributions, annual distributions may also be required during the ten-year period. The planning consequence is that a large tax-deferred account often lands on heirs during their highest-earning years, compressed into a decade — which is a reason to consider whether some of that tax is better paid by the parents, at their rates, while they are living.
How should year-end giving be structured?: Annual exclusion gifts do not carry forward — the capacity to make them expires each year and is gone. For families with a long-term transfer objective, using that capacity consistently moves meaningful value out of the estate over time without touching the lifetime exemption. Beyond that, the mechanics matter: gifts of appreciated securities are treated differently from cash, direct payments of tuition and medical expenses to the institution are handled separately from the annual exclusion, and gifts made near year-end need to be completed rather than merely initiated. Coordinating the timing with the year's overall tax picture is a conversation to have in the fall, not in the last week of December.
How do you coordinate with my estate attorney?: The attorney drafts the documents and advises on the law; we do not do either. What we do is make sure the plan and the assets match — that beneficiary designations line up with the trust, that accounts are titled the way the documents assume, that the attorney knows what the balance sheet actually looks like, and that changes in the plan reach the documents rather than sitting in a file. Our annual cycle includes collaboration meetings for exactly this reason, because the most common estate planning failure is not a badly drafted document; it is a well-drafted document that no longer matches the assets it governs.