The One Big Beautiful Bill Act Reshapes Wealth Planning
Signed on July 4, 2025, the One Big Beautiful Bill Act permanently embedded a $15 million per-person federal estate and gift tax exemption, indexed for inflation, a genuine win that replaced the feared reversion to roughly $7 million under the expiring Tax Cuts and Jobs Act. The legislation delivered certainty. What it also delivered, without fanfare, was complacency.
Lost Tax Benefits
Two provisions buried in the OBBBA take effect in 2026 that most principals haven’t fully absorbed. First, a 35% cap on the tax benefit value of all itemized deductions now applies to top-bracket taxpayers. Second, a 0.5% adjusted gross income (AGI) floor makes the first slice of every itemizer’s charitable contributions non-deductible. For a principal with $3 million in AGI, that floor kills the deduction on the first $15,000 of annual giving. For a family office running $500,000 annually through a donor-advised fund (DAF), the rate cap change—37% to 35%—results in roughly $10,000 in lost tax benefits per year. Modest in isolation. Material across a compounding philanthropic program spanning decades. This is Washington taxing concentrated wealth through the income side now that the estate tax front has been politically conceded.
For family offices with meaningful exposure to private equity and private credit—sectors that have collectively surpassed $2 trillion in global assets under management per Federal Reserve supervisory data—the strategic implication is direct: Every quarter of delayed trust structuring is a quarter spent subsidizing Washington’s next budget reconciliation package with your own compound growth. The $15 million exemption is generous. It isn’t permanent in any political sense. A future Congress needs only a simple majority to undo what this one passed.
State Billionaire Taxes
The second risk is geographic, and it’s moving faster than most advisors are acknowledging. The California 2026 Billionaire Tax Act (Initiative No. 25-0024), now gathering signatures for the November 2026 ballot, proposes a one-time 5% levy on California residents with net worth above $1 billion as of Jan. 1, 2026. The trigger date is the trap. Any individual who was a California resident on that date faces potential exposure regardless of where they live when the initiative passes—a provision specifically engineered to close the relocation escape hatch.
Six publicly confirmed departures—Peter Thiel, Larry Page, Sergey Brin, Steven Spielberg, Don Hankey and David Sacks—removed an estimated $536 billion in wealth from California’s tax base before the initiative even qualified for the ballot, per a Stanford Hoover Institution analysis. Illinois, New York and Washington are pursuing analogous wealth tax proposals. In a state with structural deficits, a Service Employees International Union-backed ballot mechanism, and no requirement to clear a gubernatorial veto, the federal exemption operates as a floor, not a ceiling.
Lack of Succession Plans
The third landmine is internal governance, and in 30 years of advising families, I’ve found it to be the most reliably underestimated. The J.P. Morgan 2026 Global Family Office Report, surveying 333 single-family offices across 30 countries with an average net worth of $1.6 billion, documents that 86% of global family offices lack clear succession plans for key decision makers, and 53% of business-owning families rank succession as a top concern. Research tracking 3,200 wealthy families over 20 years shows 70% lose their wealth by the second generation and 90% by the third. The $124 trillion intergenerational transfer underway in the United States will flow to heirs—only some of whom are prepared to receive it. No estate tax exemption compensates for that failure.
Steps to Take
What should family offices do in light of these developments? Here are some suggestions.
Front-load the appreciation. Move high-growth private equity and private credit positions into spousal lifetime access trusts (SLATs) before appreciation occurs, so it compounds inside the trust rather than on the personal return. Critical caveat: the Reciprocal Trust Doctrine—affirmed in United States v. Estate of Grace, 395 U.S. 316 (1969)—requires meaningful differentiation in beneficial class, creation timing and powers of appointment between dual-SLAT structures. Mirror-image arrangements are the Internal Revenue Service’s primary attack vector. Engage competent counsel before executing. This isn’t a DIY transaction.
Restructure the philanthropic program now. The 2025 tax year was the last window at the full 37% deduction rate before the 35% cap and the 0.5% AGI floor took effect Jan. 1, 2026. If that window closes without action, the priority shifts to bunching contributions in years with elevated realized income, coordinating DAF deployments with liquidity events and auditing Internal Revenue Code Section 199A pass-through deduction eligibility annually is now the primary battleground for income tax mitigation at the operating level.
Commission the governance architecture while the founding principal is still in a position to model the standards required of the generation that will inherit it. A family constitution with merit-based capital access criteria. An independent investment committee with documented mandates and genuine decision-making authority. Next-generation readiness standards with accountability metrics that precede capital access. These aren’t soft exercises or facilitated off-site retreats. They’re the structural difference between planning that produces multigenerational outcomes and planning that finances a second-generation lifestyle upgrade.
Update the Playbook
The federal government carries $39 trillion in debt. The OBBBA is a tactical retreat on one front, not a strategic surrender. Washington will find the revenue—it always does—and the next source is already visible: high-income earners, state-level wealth taxes and philanthropic deductions. Every $15 million exemption has a ceiling above it, a state tax office beside it and a governance gap beneath it.
The principals who will look back on 2025 and 2026 as missed opportunities are the ones currently celebrating a legislative win without updating the playbook. Skate to where the puck is going.