With the Trump administration now in its second term, significant shifts in estate planning and Medicaid policies are on the horizon. Whether you’re planning your financial legacy or safeguarding assets for long-term care, understanding these proposals is key to staying ahead. In this month’s newsletter, we explore what’s being discussed and how it might impact you.
Estate Planning: A Tax Revolution on the Way?
The Trump administration has signaled a bold approach to estate taxation, reviving discussions from its first term while introducing new ideas. Here’s what’s on the table:
Repeal of the Federal Estate Tax
- Today: As of 2025, if you have an estate worth more than $13.99 million per individual (nearly $28 million for couples), it is subject to federal estate tax. Without Congressional intervention, this exemption decreases to approximately $7 million in 2026.
- Proposed Change: The Trump administration has proposed eliminating the federal estate tax entirely or making the current high exemptions permanent. Either proposal, if implemented, could ease the burden on high-net-worth families—but it’s not a done deal yet, as legislative hurdles remain.
- What It Means: High net worth individuals and couples may no longer need complex tax planning.
- Pennsylvania Twist: Individuals and couples planning in Pennsylvania, which imposes its own inheritance tax, will continue to need an estate plan that includes tax avoidance strategies.
- Note: If Congress doesn’t act, the federal estate tax exemption decreases to $7 million in 2026. Individuals and couples with financial net worths close to this amount should closely watch what Congress does and implement an estate plan that accounts for this possibility.
Capital Gains Tax Shake-Up
- Today: If you buy stock for $200,000 and it’s worth $1 million when you pass away, your heirs inherit it at $1 million. That $800,000 gain? Tax-free, thanks to a “step-up” in basis.
- Proposed Change: There is a proposal to end the basis step-up at death. Instead, your heir would receive the asset with the same taxable basis as when you owned it (typically set at the time you purchased the asset). When the asset is inherited, this carryover basis would be used to calculate the capital gains. Under this plan, that stock you bought for $200,000 would be inherited with that basis and your estate (or beneficiary) would owe taxes on the $800,000 gain.
- What It Means: Estates (or beneficiaries) could face immediate (and large) tax liabilities on inherited assets. Planning ahead to ensure that there is enough cash to cover these taxes, particularly if the asset is one that will not be sold (such as a family business or home) will be critical.
Unsure how these changes might affect your estate plan? Contact the team at HighPoint Law Offices, P.C. for a personalized review of your plan. Let’s ensure your strategy aligns with the evolving tax landscape. Schedule a consultation today!
Medicaid Planning: Will Long-Term Care Be Impacted?
So far, the Trump administration has left the nursing home industry untouched. However, since half of all Medicaid spending flows to the managed care industry, significant cuts to long-term care programs should be expected. Some proposals being considered include:
Elimination of Medicaid Asset Protection Trust (MAPT)
- Today: An MAPT is a vital tool for preserving assets—like your home, business, investment accounts, etc.—while qualifying for Medicaid. By transferring assets into an MAPT at least five years before applying, you can shield them from Medicaid’s asset limits and estate recovery.
- Proposed Change: Potential reforms to Medicaid could prohibit MAPT’s altogether.
- What It Means: If this reform occur, existing MAPT’s will probably remain valid under a grandfather clause. However, those without MAPT’s will lose the ability to use such trusts to shield their assets from long-term care expenses
Extension of the Look-Back Period
- Today: As part of the Medicaid application process, you are subjected to a five-year look back period during which the Pennsylvania Department of Human Services reviews all of your financial records going back five years to make sure you didn’t gift or transfer other assets. Improper gifts and other asset transfers may result in a period of ineligibility or penalties.
- Proposed Change: The Trump administration may extend the five-year look back period to 10 or more years.
- What It Means? Extending the look-back period would result in longer periods of ineligibility and penalties.
Reducing or Eliminating Medicaid’s Home Equity Exemption
- Today: For Medicaid qualification purposes, some assets—like your house or car—are not included when determining your eligibility (but are subject to the Estate Recovery Program meaning that Pennsylvania’s Medicaid agency will seek reimbursement of care costs from your estate). In Pennsylvania, there is a home equity interest limit of $730,000 (for the year 2025).
- Proposed Change: The home equity exemption could be reduced or eliminated.
- What It Means? If the home equity exemption is reduced or eliminated, all or part of the equity in your home could be counted as an asset for Medicaid purposes. Accordingly, in order to qualify for benefits, you may be forced to sell your home.
Elimination of Medicaid Compliant Annuities
- Today: In Pennsylvania, you may only have an asset limit of $2,400 to qualify for long-term care Medicaid. A Medicaid compliant annuity is a planning strategy that allows you to lower your countable assets without violating the look-back rule and may even accelerate Medicaid eligibility.
- Proposed Change: Trump 2.0 may eliminate Medicaid Compliant Annuities.
- What It Means? Without Medicaid Compliant Annuities, you may be forced to spend down a significant portion of your assets before qualifying for Medicaid benefits.
Worried about how the Trump administration proposals could affect you? Let’s discuss proactive planning, including adding a MAPT to your estate plan, so you can secure your assets before policy shifts take effect. Planning ahead is your best defense! Call HighPoint Law Offices, P.C. today.
