Gene Farrell

Mar 24, 2026

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Why Bypass Trusts Built Before OBBBA May Now Be Costing Your Clients Money

When the One Big Beautiful Bill Act passed last July, I watched advisors exhale. The exemption sunset everyone had been bracing for didn’t happen. The $15 million per-individual exemption was locked in permanently. The deadline pressure was gone.

That exhale worries me.

Not because the law is bad — it isn’t. But because relief has a way of crowding out urgency. And right now, sitting inside millions of client files, is a problem that didn’t go away when the exemption did. It just got harder to see.

The sunset created a habit. The OBBBA broke it.

For years, the looming exemption reduction gave advisors a built-in reason to initiate estate planning conversations. Clients needed to act. There was a deadline. The urgency was real and easy to point to.

That forcing function is gone. And without it, both clients and advisors drift toward deferral — which is the most human response imaginable, and also the most dangerous one right now.

Here’s what’s actually in those files: bypass trusts calibrated to old exemption thresholds. SLATs funded to capture what clients feared they’d lose. Gifting programs designed to beat a sunset that never came. Some of it still makes sense. A lot of it doesn’t. And some are now working against the client in ways that weren’t foreseeable when the documents were drafted.

The most concrete example: bypass trusts built around the old exemption can deny the family a second step-up in basis at the surviving spouse’s death. The trust designed to protect the family is now costing them in income tax what it saved them in estate tax — in a world where federal estate tax exposure has been dramatically reduced for most HNW households. Clients don’t know this. They have signed documents. They believe they’re covered.

The real problem in 2026 isn’t complexity. It’s the review gap.

I talk to advisors about this constantly. They know the reviews need to happen. What they don’t have is a way to do it without grinding everything else to a halt.

Reviewing an estate plan the traditional way means manually reading through trust documents, wills, beneficiary designations, titling records — and holding all of it in your head while you map it against how the OBBBA changes the picture. For a practice with 300 HNW households, that’s not a project you slot into a quarter. It’s a staffing problem most firms don’t have the headcount to solve.

So the calculation gets made: important, but not urgent enough to disrupt everything else. Another quarter passes. The gap widens.

The industry talks constantly about the $124 trillion wealth transfer. Less discussed is the quality of the plans that will govern how that wealth actually moves. A meaningful portion of those plans are outdated right now. Some will generate real, unnecessary tax costs for families at the worst possible moment. Not because of bad advice — the original planning was right for the rules that existed. But the rules changed, and the review hasn’t happened.

Firms that can surface plan-level issues across a full book of business — systematically, not manually — are the ones that will actually close this gap. The rest will keep meaning to get to it.

The advisors who move now will be the ones clients remember.

The OBBBA created something the industry rarely gets: a defined planning window without a hard deadline attached to it. Exemptions are historically high. The law has no sunset. And there’s a real body of existing work that needs to be revisited.

Complexity didn’t leave estate planning when the exemption went up. It relocated. The advisors who understand where it moved are going to look very different from the ones who wait for a client to ask.

The client who gets a proactive call this spring — “we’ve been reviewing how the new law affects your plan, and here’s what we found” — will remember that. Probably for a long time.

That’s not a small thing. In a business built on trust and referrals, it’s everything.