Important Changes for Elder and Estate Planning in the One Big Beautiful Bill
2.2.2026
This article provides a brief practical overview of changes introduced by the One Big Beautiful Bill that are relevant to elder law and estate planning. We cover changes to 529 plans, ABLE Accounts, the new Trump Accounts, the Estate and Gift Tax Basic Exclusion amount, and changes to Medicaid, Medicare and Social Security.Each section will note the effective date of new provisions (e.g., date of enactment, following taxable year, or future date) and an expiration date if the legislation establishes one. For any provision that does not have an expiration date or that is labeled as “permanent,” please keep in mind that this can change based on the presidential administration and political composition of Congress.[1]
529 Plans – Sections 70413 and 70414
529 plans are popular family planning vehicles that allow family members to contribute to non-taxable accounts for the benefit of younger family members attending school to cover the cost of “qualified higher education expenses.” Prior to the bill these expenses were limited to tuition, room and board, fees, books, supplies, and equipment required for enrollment, along with up to $10,000 of tuition for public, private or religious elementary and secondary school.
Section 70413 of the bill expanded the class of “qualified higher education expenses” to include K-12 expenses for curriculum and curricular materials; books and other instructional materials; online education materials; tuition for tutoring or educational classes outside the home (with certain limitations); fees for standardized testing, advanced placement exams, and college admission exams; dual enrollment fees and educational therapies for students with disabilities.
Of particular interest to elder and estate planning practitioners is the tutoring and educational therapies expansion. Tutoring includes educational classes outside the home, including at a tutoring facility (e.g., Kumon and similar academies). Tutors must not be related to the student and must be qualified and experienced in the subject area. The act does not limit “tutoring” to children with special educational needs. Educational therapy for students with disabilities includes occupational, behavioral, physical, and speech-language therapy by licensed or accredited providers.
Further, the withdrawal rights for elementary and secondary school tuition payments in 529(e)(3) were doubled from $10,000 to $20,000 per taxable year.
Note that the effective date of the provisions for the expanded “qualified higher education expenses” is the enactment date of the bill (July 4, 2025) while the effective date for the increased tuition cap is the taxable year after Dec. 31, 2025. No expiration date was set forth in the act; therefore, the above changes are permanent.
Additionally, Section 70414 of the act expands 529 plans to cover “qualified postsecondary credentialing expenses.” These expenses are designed for “recognized postsecondary credentials,” which is a broad category outlined in Section 529(f) that includes credentials for the trades, military, and many higher level professions. The covered expenses include tuition, fees, books, supplies, and required equipment along with testing fees and continuing education required to maintain credentials.
The effective date for the expanded postsecondary credentialing expenses is the act’s enactment date (July 4, 2025). It has no expiration date.
ABLE Accounts – Sections 70115, 70116, and 70117
ABLE (Achieving a Better Life Experience) Accounts are tax-advantaged savings accounts established for the benefit of disabled individuals (with a disability arising before age 26) that can pay for qualified disability expenses, such as housing, education, and health care, without jeopardizing eligibility for public benefits.
Prior to the act, the annual contribution limit to ABLE Accounts was equal to the federal gift tax exclusion ($19,000 in 2025). There was an additional limit for accounts established for disabled individuals who were employed, which was equal to the lesser of the applicable federal poverty limit for a one-person household or the beneficiary’s employment compensation for the year. These additional limits were set to expire on Dec. 31, 2025. Section 70115 of the act permanently extends the additional contribution limits and provides an additional year of inflation adjustment.
The amendments in Section 70115 will apply to taxable years beginning after Dec. 31, 2025.
Prior to the bill, the saver’s credit in 26 U.S.C. 25B for ABLE Account beneficiaries who contribute to their own ABLE Accounts was set to expire on Dec. 31, 2025. Section 70116 permanently extends the saver’s credit for these designated beneficiaries. The effective date of this change is taxable years after Dec. 31, 2025. The credit amount is increased from $2,000 to $2,100, which applies to taxable years after Dec. 31, 2026. Note the one-year difference between the extension of the saver’s credit and the increase in the credit amount.
529 plans can be rolled over tax-free to ABLE Accounts for the designated beneficiary or for a family member of the designated beneficiary. This rollover was set to expire on Dec. 31, 2025. Section 70117 permanently extends this tax-free rollover to ABLE Accounts, effective for taxable years after Dec. 31, 2025.
Trump Accounts – Section 70204
This is a brand-new provision that establishes specialized savings accounts for minors. The accounts are considered “individual retirement accounts” under Section 408(a), but are not Roth IRAs. Parents, relatives, and others (including employers) can contribute to Trump Accounts. Annual contributions are limited to $5,000, adjusted for inflation. Contributions are not taxable. Trump Account funds can be used for future educational, homeownership, and entrepreneurial expenses. Contributions can only be invested in “diversified funds that track an established index of U.S. equities,” such as the S&P 500.
Trump Accounts must be established before a child turns 8 years old and contributions cannot be made after a child turns 18 years old. There is a pilot program for children born between Dec. 31, 2024 and Jan. 1, 2029 in which the federal government will make a one-time contribution of $1,000.
Distributions from Trump Accounts to the beneficiary come with important limitations. Between ages 18 and 25, beneficiaries have access to up to one-half of Trump Account funds solely for qualifying higher education expenses. Once a beneficiary turns 30 years old, they have access to the entire account balance. Unlike 529 plans, for which distributions are tax-free, Trump Account distributions are taxable, but at specific rates. For instance, distributions for qualifying expenses, like education or homeownership, are taxed at the long-term capital gains rate. Distributions for non-qualifying expenses are taxed as ordinary income. Under existing law, gift recipients are not normally subject to income tax. This is an important consideration if Trump Accounts will factor into long-term asset planning.
Trump Account contributions can begin July 4, 2026. Further Treasury regulations are expected.
Estate and Gift Tax Exemptions – Section 70106
The previous extension and enhancement of the Estate and Gift Tax Basic Exclusion amount of $10 million was set to expire Dec. 31, 2025. Section 70106 extends and enhances the basic exclusion amount to $15 million for an individual or $30 million for a married couple filing jointly beginning in 2026. The new limits in 2026 are established as the reference point for future inflation adjustments of the basic exclusion amount. These changes are permanent unless there is future legislation that alters the exclusion amount.
Medicaid – Subtitle B – Health, Chapter 1
Extensive changes were made to Medicaid eligibility and administration. We will cover those that impact elder/Medicaid planning (mostly non-MAGI Medicaid).
Immediately upon enactment (July 4, 2025), the act stops the implementation, enforcement, or administration of increased nursing home staffing requirements through Sept. 30, 2034.
Beginning Oct. 1, 2026, Medicaid eligibility for legal immigrants will be limited to green card holders (lawful permanent residents), certain Cuban and Haitian immigrants (See Section 501(e) of the Refugee Education Assistance Act of 1980), individuals living in the USA under a “Compact of Free Association” (COFA),[2] and lawfully residing children and pregnant women already covered by existing state plans. The act now excludes lawfully residing “humanitarian immigrants” such as refugees, asylees, parolees, and certain abused spouses, children, and trafficking victims (until they have a green card for five years). On Jan. 4, 2028, all ineligible persons must be disenrolled from Medicaid.
Beginning Jan. 1, 2027, pursuant to Section 71112 of the act, Medicaid retroactive coverage is limited to two months prior to application for benefits for non-MAGI applicants. This includes most people over age 65, the blind, and disabled. For MAGI applicants, the Medicaid retroactive coverage period will be one month prior to application.
Also beginning Jan. 1, 2027, pursuant to Section 71119 of the bill, all “able-bodied” adults age 19-64 years must show 80 hours per month of a) work at the federal minimum wage; b) community service; c) work program; or d) half-time school (or combination thereof). They must also show compliance for at least one month prior to application and redetermination is done every six months (no longer annually). There are mandatory exemptions for disabled individuals (for further definition see Section 71119 of the OBBB), pregnant or post-partum women, and caretakers of dependents and disabled individuals of any age. There are also optional exemptions for short-term hardships like hospitalization, areas with high unemployment rates, and traveling long-distance for medical care.
Beginning Jan. 1, 2028, pursuant to Section 71108 of the act, the new home equity cap will be $1 million and inflation indexing is eliminated. Further, states may not apply any “disregards” that would effectively increase this cap. Rules governing situations where an applicant’s spouse still resides in the home are not affected. Presently, the New York State equity cap with COLA increases is $1.079 million.
Beginning July 1, 2028, states may apply for a new Section 1915(c) waiver to provide home and community-based services to individuals who meet state-defined needs-based criteria, but not an institutional level of care – so long as the new waiver would not materially increase wait times for individuals already on wait lists for coverage.
Medicare – Subtitle B – Health, Chapter 2, Section 71201
The biggest change to Medicare eligibility is the limitation on the classes of legal immigrants eligible for coverage. Effective Jan. 1, 2027, only green card holders, certain Cuban and Haitian immigrants, and COFA immigrants are eligible. Note that these are the same categories for Medicaid eligibility defined above.
Social Security Benefits – Section 70103
For taxable years 2025 through 2028, senior citizens 65 and older will receive an extra $6,000 income deduction to reduce or eliminate tax on Social Security benefits. This deduction begins to phase out for individuals earning $75,000 ($150,000 for married filing jointly) and is fully phased out for those individuals earning $175,000 ($250,000 for married filing jointly).
Matthew Parrott is an associate attorney at the Law Offices of Stack & Associates in New York City. Tamara L. Stack is the principal attorney at the Law Offices of Stack & Associates in New York City. She is co-chair of the Estates, Trusts & Tax Issue Committee of the Elder Law and Special Needs Section. This article appears in the Elder and Special Needs Law Journal, a publication of NYSBA’s Elder Law and Special Needs Section. For more information, please visit nysba.org/elder.
Endnotes:
[1] The full text of the bill can be found here: https://www.congress.gov/bill/119th-congress/house-bill/1/text/pl?format=txt.
[2] A COFA is a special agreement between the United States and three Pacific Island nations – the Federated States of Micronesia (FSM), the Republic of the Marshall Islands (RMI), and Palau – that grants them full internal self-government while the U.S. manages their defense and foreign affairs. Citizens of these nations can live and work legally in the United States.
