A New Focus in Estate Planning
The One Big Beautiful Bill Act (OBBBA) has permanently raised the federal estate and gift tax exemption to $15 million per person starting in 2026, reshaping the landscape of estate planning. For many clients, this means estate tax exposure has effectively disappeared, but it also means that income tax planning, and particularly maximizing basis step-up opportunities, has taken center stage.
In this webinar, Martin M. Shenkman, Jonathan G. Blattmachr, and Robert S. Keebler examined the implications of OBBBA on basis planning, exploring how practitioners should reassess existing strategies and adapt for the future.
Why Basis Planning Matters Now
With fewer estates subject to federal estate tax, basis has become one of the most critical factors in planning. The panel explained how basis is determined, how it changes over time through depreciation and improvements, and how it is treated upon sale or death. They stressed that overlooking basis considerations can result in significant missed opportunities for tax efficiency.
Revisiting Old Plans in a New Environment
Many clients who established irrevocable trusts, SLATs, or credit shelter trusts in anticipation of a much lower exemption now find themselves with structures that no longer provide tax benefits and may actually create disadvantages by forfeiting a basis step-up. The panel encouraged practitioners to revisit these legacy plans and consider whether modifications, distributions, or decanting may unlock better outcomes under today’s rules.
Creative Tools and Strategies
The panel highlighted a range of planning approaches designed to optimize basis in the OBBBA era. Strategies included upstream planning, such as granting general powers of appointment to senior family members with smaller estates to secure inclusion and a step-up, and downstream planning, such as gifting assets to an adult child, or to a trust that is treated as a grantor trust for that child, so that future gains are recognized in the child’s lower tax bracket.
They also discussed the potential benefits of community property trusts in jurisdictions with opt-in statutes like Alaska, South Dakota, or Tennessee, which may allow couples to secure a double step-up in basis at the first spouse’s death. Finally, the panel considered the use of Joint Estate Step-Up Trusts (JESTs), innovative but sometimes contested structures that may permit a full basis step-up on the first death. Each of these techniques carries important caveats, from creditor protection concerns to possible IRS challenges, underscoring the need for thoughtful drafting and careful review.
Balancing Basis Gains with Other Protections
While the promise of a step-up in basis is powerful, the speakers cautioned that unwinding existing trusts or modifying them too aggressively can carry risks. Loss of asset protection, exposure to creditors, Medicaid eligibility concerns, and family disputes must all be factored into planning decisions. Non-judicial modification agreements (NJMAs) and carefully crafted powers of appointment may offer ways to strike the balance between asset protection and tax efficiency.
Planning with Flexibility
The consensus of the panel was clear: basis planning must now be integrated into every estate plan, but flexibility is key. No one can predict whether future administrations will lower the exemption, reintroduce estate tax exposure, or adjust rules around basis. Structuring plans that can adapt over time, through powers of appointment, trust modifications, or decanting, ensures clients remain prepared for whatever lies ahead.
As Jonathan Blattmachr noted, “OBBBA has changed the playing field, but it hasn’t removed the need for thoughtful, forward-looking planning. If anything, the importance of careful basis planning has never been greater.”
Watch the full webinar above to gain insight into how OBBBA has transformed basis planning and discover the strategies practitioners can use to help clients preserve tax efficiency and family wealth.