As 2026 approaches, major shifts are on the horizon for families, professionals, and retirees across New York. Congress recently passed the One Big Beautiful Bill Act (OBBBA), a sweeping piece of legislation that reshapes everything from federal taxes to Medicaid and new savings programs for children.
For New Yorkers, understanding these changes—especially the New York estate tax changes in 2026—is essential for keeping financial and estate plans on track. The OBBBA brings a mix of benefits, challenges, and tough trade-offs. This overview breaks down what’s most relevant to New York residents: the estate tax updates, Medicaid revisions for seniors, and the introduction of Child Investment Accounts.
Whether you’re a parent, a high-net-worth individual, or planning for retirement, this guide will help you see how the OBBBA may affect your family’s wealth, healthcare, and long-term planning.
The “Good”: Tax Changes for New Yorkers Under the OBBBA
The OBBBA includes a series of tax provisions designed to ease some of the burdens on middle- and upper-income taxpayers—particularly in high-tax states like New York.
Here’s what stands out:
- Reinstated SALT deduction: The law restores the full deduction for state and local taxes (SALT), which was previously capped at $10,000. This is a major benefit for New York families and professionals, especially those in higher-income brackets who itemize their deductions.
- Extended federal estate and gift tax exemption: The OBBBA continues the higher exemption threshold for estate and gift taxes through at least 2026. This provides added certainty for those engaged in long-term wealth transfer or business succession planning.
- Child Investment Accounts: Beginning in 2025, every child born through 2028 will automatically receive a federally backed investment account designed to help families build long-term savings for education or future milestones.
While these updates bring relief, it’s important to remember that New York’s estate tax remains separate from federal law. The state’s exemption—estimated at roughly $7 million in 2025—will not increase under the OBBBA. For high-net-worth New Yorkers, this means estate plans should be reviewed to ensure assets are protected from potential state-level taxation.
If you haven’t reviewed your estate plan since before these updates, this is an ideal time to revisit your documents. As you age or navigate residency changes, revisiting these documents becomes even more important—especially as New York’s estate and income tax laws continue to evolve. (See also: How New Yorkers Can Prepare for the Upcoming Estate Tax Changes.)
The “Bad”: A Growing Deficit and Future Uncertainty
While many of the tax provisions are popular, they come at a cost. The OBBBA’s tax cuts and new programs significantly expand the federal deficit, leaving open questions about how future Congresses might respond.
For individuals and families in higher income brackets, this uncertainty means one thing: stay flexible. The possibility of future tax hikes—or a rollback of current deductions—should be factored into every long-term estate or gifting strategy.
Maintaining liquidity, balancing trusts and direct ownership, and revisiting your charitable giving structures are smart ways to preserve adaptability if the fiscal landscape shifts again in coming years.
The “Ugly”: Medicaid Cuts and What They Mean for New York Seniors
Perhaps the most concerning element of the OBBBA for many families is the reduction in federal Medicaid funding. The law tightens reimbursement formulas to states and may force New York to scale back certain long-term care programs.
Key impacts for New York residents may include:
- Stricter eligibility requirements for long-term care assistance
- Reduced funding for home-based care and nursing programs
- Potential delays in Medicaid application processing due to state budget pressure
If you or a loved one may need long-term care in the coming years, Medicaid planning will be more important than ever. Advanced strategies—such as setting up irrevocable trusts or transferring certain assets early—can help protect eligibility and preserve your family’s financial stability. For more insight, see How Pending Medicaid Changes Will Impact Long-Term Care Planning in New York.
These changes reinforce a key estate planning principle: the earlier you plan, the more options you have.
What You Need to Know About the New Child Investment Accounts
One of the most innovative (and family-friendly) parts of the OBBBA is the creation of Child Investment Accounts (CIAs).
Starting in 2025, each child born in the U.S. will automatically receive a federally administered investment account with an initial contribution from the government. Families will be able to make additional tax-advantaged contributions each year.
How it works:
- Accounts are established automatically for children born between 2025–2028.
- The funds grow tax-free and can be used later for education, home purchases, or business startup costs.
- Parents and grandparents can contribute additional funds under new annual gift allowances tied to the federal gift tax exemption.
While this program won’t replace traditional 529 college savings plans, it adds a new layer to intergenerational wealth building—especially for families already focused on structured estate planning.
Estate Planning Takeaways for 2026 and Beyond
The OBBBA creates both opportunities and challenges for New Yorkers. The combination of estate tax changes, Medicaid revisions, and new family savings programs means that every well-designed estate plan should be reviewed for alignment.
Ask yourself:
- Does your current estate plan take advantage of the extended federal exemptions?
- Are your assets structured to minimize New York’s separate estate tax?
- Do you have a Medicaid strategy in place to protect against potential funding cuts?
- Should your family consider contributing to a Child Investment Account?
A brief review with an experienced estate planning attorney can ensure your documents, trusts, and gifting strategies are fully updated for this next phase of federal and state change.
FAQs
1. How do the New York estate tax changes in 2026 affect me?
The federal exemption remains high under the OBBBA, but New York’s separate exemption (about $7 million) still applies. If your estate exceeds that amount, your heirs could owe state estate taxes even if you’re exempt at the federal level.
2. Will Medicaid still cover long-term care in New York?
Yes, but potentially with more restrictions. Budget cuts under the OBBBA could reduce available benefits or delay application processing. Early Medicaid planning is the best protection.
3. Are Child Investment Accounts like 529 plans?
Not exactly. They can be used for more purposes than education and will have different contribution and withdrawal rules. Families should review them alongside their existing 529s or trusts.
Next Step
If you’re unsure how the New York estate tax changes in 2026 or the OBBBA’s broader provisions might affect your family, The Village Law Firm can help. Our team specializes in translating complex laws into clear, actionable strategies that protect what matters most.
Schedule a legal planning session today to review your estate and ensure your plan is ready for the 2026 landscape.
