Does the OBBBA increase the federal estate tax exemption to fifteen million

As an estate planning attorney and CPA with over 35 years of experience, I’ve seen countless estate plans derailed by last-minute tax law changes. Recently, I spoke with Russell, whose carefully crafted trust faced a potential tax catastrophe. He’d structured everything based on the assumption the 2017 Tax Cuts and Jobs Act provisions would remain in place, but the looming “sunset” threatened to cut his exemption in half. He was understandably panicked about the potential cost – potentially millions in estate taxes he hadn’t planned for.

The good news is the 2026 “Sunset” was averted by the OBBBA, ensuring a $15 million per person Federal Estate Tax Exemption effective Jan 1, 2026. This is a significant relief for high-net-worth individuals, but it’s crucial to understand how this impacts your estate plan now. While the exemption is substantial, it doesn’t mean you’re immune to estate taxes. Strategic planning, especially utilizing charitable trusts, can protect excess value and maximize the benefit to both your heirs and the causes you care about.

How Can Charitable Trusts Help Protect My Assets?

For clients with estates exceeding the $15 million exemption, charitable trusts are powerful tools. They allow you to transfer assets out of your estate, reducing potential tax liability while simultaneously supporting your philanthropic goals. We often discuss two primary types: Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs).

• CRTs: Pay income to the donor/heirs for a set term, with the remainder going to charity; effective for bypassing capital gains tax on appreciated assets.
• CLTs: Provide immediate income to the charity first, preserving the remaining assets for heirs at a future date.

The benefit of a CRT, from a CPA’s perspective, is significant. By donating appreciated assets to a CRT, you can avoid immediate capital gains taxes and receive an income tax deduction. The trust then sells the assets, generating income for you or your beneficiaries without the immediate tax hit. The eventual charitable remainder escapes estate taxation altogether.

What Happens If the Charity I Name in My Trust Ceases to Exist?

It’s a valid concern. Organizations can dissolve, merge, or change their missions. If a named charity ceases to operate, California courts apply the Cy Pres Doctrine to redirect assets to a comparable charitable cause, provided the trust doesn’t name a specific successor. That’s why meticulous drafting, and periodically reviewing your trust document, is so vital.

How Does the Attorney General Oversee Charitable Trusts in California?

Trusts established for charitable purposes are not entirely free from oversight. Trustees of California charitable trusts are mandated to comply with annual reporting obligations via the Registry of Charitable Trusts under Government Code § 12585, subject to supervision by the Attorney General to prevent self-dealing or mismanagement. This ensures funds are used as intended and maintains public trust in the charitable sector. We handle all the necessary reporting for our clients, ensuring full compliance.

What About Digital Assets and My Charitable Intentions?

In today’s digital world, charitable giving extends beyond traditional assets. Digital assets like cryptocurrency or online accounts can also be included in your charitable plan. However, without specific RUFADAA language (Probate Code § 870) in the Charitable Trust, service providers can legally block a trustee from accessing digital accounts or cryptocurrency intended for charitable distribution. It’s essential to include explicit instructions for accessing and managing these assets.

Can I Use a Simplified Procedure to Transfer Real Estate to a Charity?

For smaller estates, transferring real estate to a charity can be streamlined. If the real property’s value is less than $69,625, the Small Estate Affidavit can be used. However, for deaths on or after April 1, 2025, a residence valued up to $750,000 gifted to a charity qualifies for a ‘Petition for Succession’ under AB 2016 (Probate Code § 13151). This is not the same as a small estate affidavit; it requires a Judge’s Order. Importantly, the decedent’s other non-real estate assets must remain below the $208,850 threshold for this specific succession path. We advise clients carefully on which method is most appropriate for their circumstances. And under California Probate Code §§ 15200–15205, a charitable trust is a fiduciary relationship where property is held for a specific charitable purpose, such as education, scientific research, or community development, requiring written instructions for precision and continuity.

What failures trigger court intervention and contests in California trust administration?

Success in trust administration depends on more than just the document; it requires active management of assets, precise accounting to beneficiaries, and careful navigation of tax rules. Whether dealing with a blended family or complex real estate, understanding the mechanics of trust law is the only way to ensure the grantor’s wishes survive scrutiny.

California trust planning is most effective when the structure is matched to the specific family goal and assets are fully funded into the trust name. When administration is handled with transparency and adherence to the Probate Code, the trust can fulfill its promise of privacy and efficiency.

Verified Authority on California Charitable Trust Administration

• Business Interest Compliance (FinCEN): FinCEN – Beneficial Ownership Information (BOI)
  As of March 2025, domestic U.S. LLCs are exempt from mandatory BOI reporting under the Corporate Transparency Act; however, trustees managing foreign-registered entities within a Charitable Trust must still file updates within 30 days to avoid fines of $500/day.
• Charitable Trust Formation: California Probate Code § 15200 (Creation of Trust)
  This statute governs the legal creation of fiduciary relationships for charitable purposes. It enables donors to support causes—such as education or scientific research—that align with their values through structured giving, ensuring precision and continuity that casual donations lack.
• Digital Asset Access (RUFADAA): California Probate Code § 870 (RUFADAA)
  Without specific RUFADAA language (Probate Code § 870) in your Charitable Trust or Will, service providers like Coinbase and Google can legally deny your trustee access to digital assets, potentially stalling the funding of charitable causes.
• Federal Estate Tax (OBBBA): IRS Estate Tax Guidelines
  The 2026 “Sunset” was averted by the OBBBA (One Big Beautiful Bill Act), which permanently increased the Federal Estate Tax Exemption to $15 million per person effective Jan 1, 2026, directly impacting how charitable structures are used to shield high-value estates from taxation.
• Primary Residence Succession (AB 2016): California Probate Code § 13151 (Petition for Succession)
  When transferring property to a charity, you must distinguish between the Small Estate Affidavit (real property <$69,625) and AB 2016. For deaths on or after April 1, 2025, a residence up to $750,000 qualifies for a ‘Petition for Succession’. This is a “Petition” that requires a Judge’s Order, NOT an “Affidavit.” Note that other assets must remain below the $208,850 limit.
• Property Tax Reassessment (Prop 19): California State Board of Equalization (Prop 19)
  Under Prop 19, heirs (or charities in specific scenarios) can only keep a low tax base if requirements regarding primary residency and value limits are met within one year; this is vital to evaluate when gifting real estate through a Charitable Trust.
• Registry of Charitable Trusts: California Attorney General – Registry of Charitable Trusts
  Trustees of charitable trusts must comply with annual reporting obligations under California Government Code § 12585. This resource serves as the oversight portal to ensure proper use of assets and to avoid self-dealing or deviation from the donor’s original intent.
• Small Estate Threshold (Bank Accounts/Cash): California Probate Code § 13100 (Personal Property)
  If combined “probate assets” (excluding the AB 2016 residence) exceed $208,850 (as of April 1, 2025), they are subject to formal probate; a Will alone does not allow you to bypass this limit for the purpose of funding a Charitable Trust.