Author Archives: Angel Bolton

“I’m Just a Bill”, the classic animated segment from the educational TV series Schoolhouse Rock!, first aired in 1975 and became an iconic way to teach kids about the legislative process. The segment featured the cartoon character named Bill, who is literally a rolled-up piece of paper with arms and legs, sitting on the steps of the U.S. Capitol. He explains to a young boy how a bill becomes a law in the United States, from being introduced in Congress to being signed by the President.

The process Bill described hasn’t changed much over the years, but the names certainly have. Enter Public Law 119-21, nicknamed the One Big Beautiful Bill (OBBBA), signed into law this year on July 4th (because nothing says ‘freedom’ like estate tax reform). Bill may still be a bill, but he’s gotten a lot more flair – perhaps taking a cue from the president who signed it . . . .

OBBBA is indeed BIG – it is a massive $3.3 trillion legislative package that touches nearly every corner of American life – reshaping taxes, healthcare, environmental policy, and federal spending priorities. The bill will financially affect a broad range of our population – from middle-income earners and high-net-worth families to seniors, parents, and small business owners. The legislation includes hundreds of provisions; below we have outlined a few provisions that are most impactful and relevant to our clients and associates.

OBBBA’s Impact on Estate Planning

For individuals focused on legacy and wealth preservation, OBBBA offers expanded tools to optimize estate planning and gifting strategies, such as:

  • The Lifetime Exemption and the GST Exemption have both been raised to $15 million per individual, made permanent, and are adjusted for inflation. These exemptions will now bypass the expiration that was set to take place under the Tax Cut and Jobs Act of 2017 (TCJA), which would have reduced the exemptions to approximately $7 million in 2026. The higher exemption amounts allow a greater transfer of generational wealth with strategic estate planning.
  • The Annual Gift Tax Exclusion is increased to $19,000 per recipient, enabling more tax-free gifting annually without using lifetime exemptions.

OBBBA’s Impact on Charitable Planning

Although OBBBA makes the 60% AGI limit for cash contributions to public charities permanent, initially set to expire after 2025, it also limits Charitable Deductions for itemizing taxpayers. These limitations include:

  • 0.5% AGI floor: You can only deduct charitable contributions that exceed 0.5% of your Adjusted Gross Income (AGI). For example, a person with an AGI of $200,000 would need to donate more than $1,000 for any deduction to apply.
  • The value of itemized deductions, including charitable gifts, is now capped at 35% for taxpayers in the highest (37%) tax bracket. Generosity is still rewarded – just not quite as generously as before. Uncle Sam appreciates your donation, but he’s capping his gratitude.

OBBBA’s Impact on Small Businesses

OBBBA delivers tax relief to small business owners by permanently extending key deductions that were previously set to expire under the TCJA, such as:

  • The 20% Qualified Business Income Deduction for pass-through entities such as LLCs and S-Corps (initially set to expire after 2025); in addition, OBBBA expands the phase-out ranges
  • The 100% Bonus Depreciation, which has been phasing out since 2022 under TCJA, is reinstated; OBBBA now permits the full expensing of qualified business property; A small business can deduct the full cost of business property (such as new shelving or a POS system) in the year purchased.
  • The Family/Medical Leave Credit, originally set to expire after 2025, is now permanent. OBBBA also eases eligibility requirements, making it more accessible for employers1. A small business offering paid parental leave can now more easily claim a tax credit for doing so.

Building on these extensions, OBBBA further strengthens support for small businesses by enhancing existing deductions and restoring favorable treatment for key operational expenses:

  • The Section 179 Expense Deduction under OBBBA increases to $2.5 million; and phase-out thresholds increased to begin at $4 million, adjusted for inflation. Think of a manufacturing company now allowed to expense the full cost of new equipment up to $2.5 million, improving cash flow.
  • OBBBA reverses the 5-year amortization requirement under TCJA for Research & Experimentation Deduction; now allowing immediate deductions of domestic R&E expenses in the year expenses are incurred, retroactive to 2022 for small businesses. For example, a biotech startup can deduct its 2023 lab expenses immediately, rather than amortizing them over five years.

OBBBA’s Impact on Individual Taxpayers and Families

A significant part of the bill extends or makes permanent many of the provisions that were included in the Tax Cuts and Jobs Act of 2017. According to taxfoundation.org, 62% of taxpayers will not experience tax increases that would occur if the TCJA expired as scheduled. These provisions include:

  • Lower individual tax brackets that were established in the TCJA but were temporary and set to expire in 2025 are now made permanent with OBBBA
  • The higher standard deduction established by the TCJA is permanently extended through the OBBBA and is increased to $15,750 per individual, adjusted for inflation
  • A higher Child Tax Credit established in the TCJA and scheduled to expire at the end of 2025 is now made permanent, and in addition has increased to $2,200 per child, indexed for inflation beginning in 2026
  • The Alternative Minimum Tax slower exemption phaseout and higher thresholds established in TCJA are permanently extended with the OBBBA
  • The State and Local Tax (SALT) deduction cap has been raised to $40,000 until 2029, with adjustments for inflation, and will revert to the current cap of $10,000 in 2030, with a gradual phase-out for higher income levels. A homeowner in a high-tax state can now deduct more of their property and state income taxes.

The legislation also includes a few new deductions aimed at providing financial relief and incentivizing certain economic behaviors, a few of which have specific phase-outs applicable at higher income levels. Among these new provisions are:

  • A temporary Tip Deduction of up to $25,000 per individual, from 2025 to 2028. A server earning $30,000 in tips pays no federal tax on the first $25,000.
  • An Overtime Deduction limited to $12,500 per individual; Consider a nurse working extra shifts who can now deduct a portion of their overtime income.
  • An Auto Loan Interest Deduction of up to $10,000 per year for interest on loans for U.S.-assembled vehicles taken after 2024
  • An “above-the-line” Charitable Deduction of up to $1,000 per taxpayer for those that take the standard deduction and do not itemize; this universal applies only to cash donations made directly to public charities. A taxpayer who doesn’t itemize can still deduct up to $1,000 in charitable donations, making giving more accessible.

Beyond deductions, OBBBA expands benefits for individual taxpayers through enhanced savings options, broader education coverage, and new age-based tax advantages. For example, the OBBBA:

  • Enhances 529 Savings Plans for K-12 by increasing the allowed annual withdrawal amount to $20,000; in addition, the legislation expands the definition of “qualified expenses” to include non-tuition costs. Parents saving for their child’s education can now use 529 funds for tutoring and test prep, making these plans more versatile than ever.
  • Creates a new tax-deferred retirement savings account for children (“Trump Accounts”) which includes a $1,000 government-provided incentive for children born in the next few years. The accounts also allow taxpayer contributions up to $5,000 a year that can grow tax-free until the beneficiary turns 18, at which point the account becomes a traditional individual retirement account (IRA). According to Kiplinger2, “Trump Accounts share some similarities with traditional IRAs and others with 529 college savings accounts. But they also have some quirks that make them totally unique”. The article states that “Only a fool turns down free money” and these accounts should be of interest to all parents of young children.
  • A new Senior Deduction for those age 65+ of $6,000 ($12,000 for qualified couples), from 2025-2028; deduction is phased out at higher incomes; For example: A retired couple earning $80,000 gets a $12,000 deduction, lowering their taxable income.

OBBBA’s Critics

While the OBBBA offers a wide array of benefits – from expanded tax deductions to powerful estate planning tools and small business incentives – it has also sparked significant criticism. OBBBA may be big and bold but its beauty is subjective—and in Washington, it’s often budgeted. Opponents point to deep cuts in health and social programs, environmental rollbacks, and long-term fiscal concerns that could shape future policy and economic stability. Key areas of concern include:

  • Healthcare Cuts: According to the Congressional Budget Office, OBBBA will reduce funding for healthcare programs by over $1 trillion, including major cuts to Medicaid and ACA subsidies. An estimated 10 million people could lose health insurance coverage. Reports from KFF further detail the potential impact on vulnerable populations.3,4
  • Social Program Reductions: The bill includes an estimated $120 billion cut to SNAP (Supplemental Nutrition Assistance Program)5, which provides food assistance to low-income families.
  • National Debt Surge: The Tax Policy Center projects that OBBBA will add approximately $4.2 trillion to the federal debt over the next decade, raising continued concerns about fiscal stability6.
  • Temporary Tax Benefits: New deductions that no doubt will be popular, such as those for tips, overtime pay, and auto loan interest are set to expire after 2028, limiting their long-term value.
  • Clean Energy Rollbacks: OBBBA repeals or reduces several clean energy tax credits, affecting incentives for solar installation, electric vehicle purchases, and energy-efficient home upgrades.7 If you are planning to take advantage of these incentives, consider acting soon as many are set to expire between 2026 and 2028.

Key Takeaways

The One Big Beautiful Bill Act is more than just a catchy name – it’s a sweeping piece of legislation with far-reaching implications for individuals, families, and businesses alike. Whether you’re navigating new deductions, planning your estate, strategically reviewing your charitable giving, or rethinking your business strategy, the OBBBA offers both opportunities and challenges. With so many moving parts, proactive planning is essential – ideally with a trusted advisor, a tax attorney, and maybe a crystal ball, just to be safe. At Live Oak Private Wealth, we’re here to help you make sense of it all.

And if you find yourself humming “I’m just a bill, yes I’m only a bill…” – you’re not alone. Bill once taught a generation that laws begin with an idea and a long wait on the Capitol steps. OBBBA may be bigger, louder, and far more complex, but it’s still part of the same story – just with a fancier name.

References

  1. KPMG. OBBBA Changes to Section 45S Employer Credit for Paid Family and Medical Leave.
    https://kpmg.com/us/en/taxnewsflash/news/2025/08/kpmg-report-obbba-changes-section-45s-employer-credit-paid-family-medical-leave.html

  2. Kiplinger. Should You Start a Trump Account for Your Child?
    https://www.kiplinger.com/personal-finance/family-savings/should-you-start-a-trump-account-for-your-child
  3. Congressional Budget Office. Federal Budget Reconciliation Law. https://www.cbo.gov/publication/61569
  4. KFF. Health Provisions in the 2025 Federal Budget Reconciliation Law. https://www.kff.org/medicaid/health-provisions-in-the-2025-federal-budget-reconciliation-law
  5. Forbes. Six Food System Takeaways from the One Big Beautiful Bill. https://www.forbes.com/sites/daniellenierenberg/2025/07/11/six-food-system-takeaways-from-the–one-big-beautiful-bill
  6. Tax Policy Center. 2025 Budget Reconciliation Act Will Increase Debt While Modestly Boosting Economy. https://taxpolicycenter.org/taxvox/2025-budget-reconciliation-act-will-increase-debt-while-modestly-boosting-economy
  7. Energy Innovation. Impacts of the One Big Beautiful Bill on U.S. Energy Costs, Jobs, Health, and Emissions. https://energyinnovation.org/wp-content/uploads/Impacts-Of-The-One-Big-Beautiful-Bill-On-U.S.-Energy-Costs-Jobs-Health-And-Emissions_FINAL.pdf

*This presentation should not be construed as tax advice. You should always consult with your tax professional with regard to specific tax questions and obligations.

This document is for informational purposes only and does not constitute as financial advice. Live Oak Private Wealth (“LOPW”) has prepared this document for the exclusive use by the client or third party for which it was prepared. The information herein was derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. The information contained here is not complete, may change, and is subject to, and is qualified in its entirety by, the more complete disclosures, risk factors, and other important information contained in Part 2A or 2B of Form ADV.

Live Oak Private Wealth is a subsidiary of Live Oak Bank. Investment advisory services are offered through LOPW, LLC, an Independent Registered Investment Advisor. Registration does not imply a certain level of skill or training. More information about Live Oak Private Wealth including our advisory services, fees, and objectives can be found in our ADV Part 2A or 2B of Form ADV, which is available upon request.

The Role of Trusts in Estate Planning.

The Role of Trusts in Estate Planning:
Insights from the Philip Seymour Hoffman Estate

When the Oscar-winning actor Philip Seymour Hoffman’s life and career abruptly ended in 2014 after passing away from a drug overdose at the age of 46, he left his heirs with a sizable estate valued at $34 million. Hoffman was survived by three children and a long-time partner, Mimi O’Donnell, who was also the mother of his children. Before Hoffman’s death, it was reported that he expressed a desire for his children to develop a strong work ethic and to avoid the potential pitfalls associated with being “trust fund kids.” Consequently, he bequeathed his entire estate outright to Ms. O’Donnell.

The phrase “trust fund kid” is prevalent in our popular culture, frequently carrying a negative connotation that individuals who benefit from trusts are excessively privileged and may not have to engage in work for their livelihood. In addition, the world of trusts in estate planning can seem complicated and complex and are often portrayed as vehicles that only benefit affluent families. However, trusts serve multiple significant and positive functions in estate planning, many of which contradict common misconceptions in cultural views about trusts.

Common Trust Objectives

For many individuals, a will-only based estate plan may be sufficient to accomplish their goals regarding the distribution of their estate to their designated beneficiaries. However, trusts allow for additional protections and strategies that a will-only based plan cannot offer.

By establishing a trust, the trust creator, also known as the grantor, can achieve a range of objectives. The most common include:

  • providing support for family in the event of incapacity, illness, or disability
  • avoiding the state-specific probate process and providing privacy for beneficiaries
  • reducing a taxable estate, thereby minimizing estate taxes
  • protecting assets from creditors and from divorce
  • establishing a legacy and supporting a valued charity

The various objectives and purposes of different types of trusts are crucial to understand for anyone considering their estate planning options. There are numerous types of trusts, each designed to fulfill specific needs and goals, such as revocable living trusts, irrevocable trusts, charitable trusts, and special needs trusts, among others. Each type of trust has its unique characteristics, benefits, and limitations, which can significantly influence an individual’s decision-making process regarding their estate plan.

Types of Trusts: Revocable vs. Irrevocable Trusts

Trusts can be classified as either revocable or irrevocable. A revocable trust permits the grantor to alter the trust terms during their lifetime while competent, whereas an irrevocable trust does not allow for any changes to the trust terms unless approved by the court or the beneficiaries of the trust.

The grantor’s purpose and objectives for establishing a trust determines whether a revocable or irrevocable trust is created. The modifiable nature of revocable trusts provides greater flexibility compared to irrevocable trusts, making them a popular planning option. However, assets held by a revocable trust are included in the grantor’s taxable estate and are subject to estate taxes upon the grantor’s death. Additionally, revocable trusts do not offer protection against creditor claims and lawsuits involving the grantor. On the other hand, irrevocable trusts cannot be altered once established; however, they can remove assets from the grantor’s taxable estate and provide asset protection benefits.

Revocable and irrevocable trusts funded during the grantor’s lifetime both provide privacy and avoid probate.

Types of Trusts: Testamentary vs. Living Trusts

Testamentary trusts are established upon the grantor’s death. A testamentary trust is created within the terms of the grantor’s last will and testament and remains inactive and unfunded until the grantor’s death. A grantor can amend their will during lifetime, but after death, any trust created within the will is irrevocable and cannot be changed.

In contrast, a living trust, also referred to as an inter vivos trust, is established before a grantor’s death and is administered by a trustee during and after the grantor’s life. Consequently, living trusts offer the grantor greater control over the management and execution of the trust compared to testamentary trusts, which are established upon the grantor’s death. Living trusts can be revocable or irrevocable.

Benefits of Utilizing Trusts

Returning to Philip Seymour Hoffman, what benefits could his estate have recognized if he had included trusts for his heirs in his estate plan?

  • Flexibility to Address the Decedent’s Wishes. Trusts can be tailored with specific provisions surrounding when and how heirs inherit assets, addressing concerns like those of Hoffman about “trust fund kids.” For example, a trust might require beneficiaries to earn their own income before receiving distributions, promoting a work ethic and financial independence.
  • Probate Avoidance or Minimization. Since assets held in trust typically avoid the probate process, it is likely that the Hoffman estate could have avoided the complexities and potential pitfalls associated with probate had he incorporated a revocable trust agreement into his estate plan.
    • Holding assets in trust offers more privacy for families, as trust assets typically remain out of public record, unlike those in probate. After Hoffman’s will was filed, The New York Post published it, exposing his wishes to the public. Unlike celebrities, most individuals face less scrutiny, but probate allows anyone to access details about a deceased person’s assets and beneficiaries, potentially leading to unwanted attention or exploitation.
    • The probate process can take months or years to complete. Assets held in trust can continue to be managed without interruption should the grantor or beneficiary die or become disabled. Upon death or disability of the grantor or a beneficiary, the designated trustee would continue to manage the property for the benefit of the successive beneficiaries. According to the New York County Surrogate’s Court online database, the Hoffman estate is not yet closed as of this writing, 11 years later.
    • The probate process can be expensive due to court costs and legal fees. In North Carolina, the Clerk of Court currently charges probate fees equal to 0.4% (or $4/$1,000) of the value of the estate’s probate property (up to a maximum of $6,000).
  • Tax Planning and Efficiency. Hoffman’s estate tax liability, which was approximately $15 million, could have been reduced had assets been placed in trust since the gift to his partner did not qualify for the marital deduction. The U.S. federal tax code allows for the transfer of assets between spouses without incurring estate tax at the first spouse’s death, effectively deferring the tax liability until the surviving spouse’s death. However, in Hoffman’s case, since the recipient of the gift was not a spouse, the transfer would not have met the criteria for the marital deduction.
  • Estate Planning Lock. The final allocation of Hoffman’s wealth to his children will be decided by their mother’s estate plan. What does this look like if their mother does not have a will? What if she marries and/or has additional children before her passing? Hoffman clearly believed that the mother of his children would provide for them appropriately; however, trusts offer the flexibility to incorporate these planning decisions into one’s own plan so that the plan is locked in at the initial wealth transfer. Following the death of a spouse or partner, life can evolve. Oftentimes when second families are involved, estate planning can become more intricate and nuanced. Trusts can be helpful tools for navigating those intricacies.

Reports indicate that Hoffman’s accountant and attorney recommended he designate assets for his children in his estate plan. The reasons behind Hoffman’s decision to disregard his advisors’ counsel will remain unclear; he was brilliant in his own right and may have wished to avoid the “tax tail from wagging the dog”, or simply wanted to uphold his desire that his children would not be overly reliant on inherited wealth while showing his trust in their mother to manage the estate responsibly and in a manner that would benefit their family as a whole. However, other estate planning objectives such as incapacity planning, privacy, probate avoidance, tax minimization, asset protection, and charitable goals are important for many. Incorporating a trust as part of your estate plan can help achieve these objectives and provide assurance that your assets will continue to benefit future generations. Trusts can be established in numerous ways, with virtually countless variations available; therefore, the guidance of a qualified estate planning attorney is highly recommended.

Live Oak Private Wealth offers trust and estate planning strategy discussions as an integral component of our comprehensive financial planning services. Should you have any inquiries regarding how various trusts may benefit your family, we would be pleased to discuss this with you.

 

DISCLOSURES:
This material is not financial advice or an offer to sell any product and is not a recommendation to buy or sell any particular security. Past performance is not indicative of future results. The opinions expressed are those of the Live Oak Private Wealth Management Investment Team. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass.

Live Oak Private Wealth is a subsidiary of Live Oak Bank. Investment advisory services are offered through LOPW, LLC, an Independent Registered Investment Advisor. Registration does not imply a certain level of skill or training. More information about Live Oak Private Wealth, including our advisory services, fees, and objectives, can be found in our ADV Part 2A or 2B of Form ADV, which is available upon request.

This should not be construed as tax advice. You should always consult with your tax professional with regard to specific tax questions and obligations.

 

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