Estate Planning: Change Brings Opportunity (or, perhaps, confirmation)

by Maria Tipton, J.D.

While a great deal of discussion in the estate planning world has focused on “permanently” increased gift and estate tax exemptions that went into effect with the passage of the One Big Beautiful Bill Act (OBBBA), an intriguing option known as the “Trump Account” has recently come online and offers another tool (the opportunity) when planning for descendants. However, after analysis, clients may determine that their use of other options, such as 529 plans or Roth IRAs, may be best suited for their goals (the confirmation).

Trump Accounts are newly available tax-advantaged investment accounts for any child under age 18, created to encourage long-term saving and investing. Further, eligible children born between January 1, 2025, and December 31, 2028, can receive a one-time $1,000 government contribution when an account is opened. While other family members may contribute to the child’s account, those contributions are limited to $5,000 (in the aggregate) annually. It is anticipated that there will ultimately be several investment options available, but it is likely that all such options will be limited to low-cost index funds and ETFs that track broad U.S. stock market indexes. Clients should keep in mind that, until the child reaches age 18, funds in these accounts are essentially untouchable and cannot be withdrawn. Clients should also understand that the accounts become the property of the young adult upon attaining age 18 and that they may then dispose of them as they see fit (subject to interest and penalties for early withdrawals). In sum, a Trump Account could make for a great long-term investment vehicle…or possibly a legendary senior year Spring Break.

Trump Accounts are nouveau, and thus intriguing, but clients may find that a 529 plan or even a Roth IRA for youngsters with earned income may achieve similar if not better outcomes and better dovetail with long-term goals (thus, the confirmation, if a client has implemented either). While a full comparison is beyond the scope of this note, generally speaking, 529 plans may be preferred as these plans, among other things, (i) have higher annual contribution limits, (ii) are available for immediate and tax-free access for allowed educational expenses, (iii) allow for changes of beneficiary(ies), and (iv) allow for client control for much longer than a Trump Account. For clients desiring a long-term retirement vehicle, creating Roth IRAs for young people with earned income could offer better outcomes as those accounts have a greater number of investment selections available than Trump Accounts while offering the same opportunity to educate the youth about saving and investing. Keep in mind, though, and just like with the Trump Accounts, when the youngster turns 18, Roth IRA funds become theirs, so the temptation of the epic Spring Break could be looming.

In terms of state level developments, Kentucky has recently implemented Senate Bill 50, which, among a number of other changes, includes two planning vehicles that will be available in Kentucky and that may be of interest to clients. Effective July 15, 2026, Kentucky will join Indiana and Ohio (and a host of other states) in allowing for fully directed trusts and also domestic asset protection trusts (“DAPT”). This new law uniquely positions Stock Yards Bank given our presence in Kentucky, Indiana, and Ohio, and allows us to compare/contrast the offerings of each state for our clients and assist them in implementing the various structures that will best help maximize their plan’s potential. Directed trusts could create a best-of-both-worlds for clients who have investment advisors that don’t offer trust administration services. Under the new law, clients could pair such advisors with Trustees of their choosing and have them work together to implement the clients’ long term planning goals. Under the DAPT structure, clients will be able to create an irrevocable trust for their own benefit in Kentucky and be able to potentially shield the assets of the trust from creditor claims and could, for clients living outside Kentucky, potentially have a tax-advantaged vehicle for use in connection with the sale of a client’s business. 

We provide the information in this newsletter for general guidance only. It does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, investment, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, expressed or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

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