What the OBBB Act Means for Small to Mid-Sized Estates - Condensed Version

When the One Big Beautiful Bill (OBBB) Act was signed into law on July 4, 2025, much of the attention focused on its impact on very large estates. But what about the majority of California families — those with more modest wealth? The good news is that OBBB has very little negative impact here, and in some ways provides more clarity and protection.

Estate Tax: Still Not an Issue for Most Families

• The federal estate & gift tax exemption remains high enough that most families will not come close to paying federal estate tax.

• For small to mid-sized estates, this means estate tax simply isn’t a concern under OBBB.

  
  

Step-Up in Basis Still Preserved

• Heirs of small to mid-sized estates will continue to receive a full step-up in basis.

• For California homeowners, this is crucial: children inheriting a house bought decades ago for a fraction of today’s value can still reset the tax basis to current fair market value.

• If they sell, they won’t face a crushing capital gains tax bill.

• The new “caps” on basis adjustment are aimed at ultra-wealthy estates — not families of modest means.

  
  

What Families Should Actually Focus On

Even though OBBB doesn’t bring new estate tax exposure, California families with small to mid-sized estates still have planning priorities:

1. Probate Avoidance. A properly funded living trust remains essential to avoid the time and cost of probate.

2. Property Taxes (Prop 19). California’s rules limit parent-to-child property tax transfers. Even if estate tax isn’t a concern, passing the family home may still trigger reassessment.

3. Incapacity Planning. Powers of attorney, advance health care directives, and successor trustee designations remain just as important as tax planning.

4. Income Tax Coordination. While estate tax isn’t an issue, families should still review how their plan impacts capital gains and income tax for heirs.

   
   

Bottom Line

For families with small to mid-sized estates, the OBBB Act doesn’t take away benefits. There’s no estate tax exposure, and the step-up in basis is still available. The bigger concerns remain California-specific issues like property tax rules, Medi-Cal recovery, and ensuring probate is avoided.

Next Step: If your family’s wealth is in this range, use OBBB as a reminder to revisit your estate plan — not because you face new federal taxes, but to make sure you’ve addressed California’s unique challenges and ensured your heirs will inherit smoothly and tax-efficiently.

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