President Trump signed the “One Big Beautiful Bill Act” (OBBBA) into law on July 4th. The law is over 900 pages long, so there’s a lot in there. We have taken the liberty of summarizing some of the highlights that impact elder law clients in particular. Of course, this newsletter won’t cover a fraction of all that is included in the bill. But, some of our big take-aways include Medicaid cuts, the estate tax exemption, and “Trump accounts” for children.
Medicaid Cuts
Over the next decade the law is expected to cause nearly $1 trillion in Medicaid cuts. The Congressional Budget Office estimates 11.8 million Americans may lose their health insurance. OBBBA includes several changes to Medicaid funding including a reduction in federal funds. One of the cuts comes from the new Medicaid work requirement, which requires Medicaid enrollees in 40 states (including Arizona) and Washington DC to file paperwork proving that they are working, volunteering or attending school. If they are not, they need to show that they qualify for an exemption or they risk losing their benefits.
The cuts also are expected to cause additional cost sharing for some Medicaid recipients. OBBBA requires that some states charge enrollees with incomes between the poverty level and 138% of the poverty level, $35 for certain services that were previously free or $10. The policy won’t apply to people seeking primary care, mental health care, or substance abuse treatment.
However, these changes aren’t set to happen this year for most states. Some opine that certain cuts (like the ones that impact rural hospitals) they may never happen, as lobbyists have time to undue them before they take effect.
Estate and Gift Tax Exemption
With the sunset of the Tax Cuts and Jobs Act approaching in 2026, many estate planning practitioners were wondering if the estate tax exemption would drop, or if Congress would act, to keep it high. Through this bill, Congress acted. Beginning in 2026, Congress increased the estate tax exemption to $15 million per person. The exemption will be adjusted for inflation each year afterwards. If you’re curious, the estate tax exemption is currently over $13.9 million per person for those who die in 2025.
Trump Accounts
The law includes a new type of tax-deferred savings account for us children born between 2024 and 2028. There is a $1,000 government contribution at birth, and family members and friends can contribute $5,000/ year adjusted for inflation afterwards. Employers can contribute $2,500/ year adjusted for inflation, which doesn’t count towards the gross income of the employee. The funds are accessible starting at age 18 and at that point follow similar rules similar to that of an IRA. Withdrawals made before age 59 1/2 are subject to income tax and penalties, but there are a lot of exceptions for certain purposes like education, housing, training or business.
