Here’s what HIVE AI had to say about “Trust and estate tax planning post-2025 changes”:

Trust and Estate Tax Planning After the 2025 Changes

What changed under OBBBA for estates and gifts starting 2026

• The federal basic exclusion amount for estate and gift tax is increased to $15,000,000 per person (indexed for inflation) beginning for decedents dying and gifts made after December 31, 2025. This is enacted by amending IRC §2010(c)(3) and removing the scheduled “sunset” reduction; practically, a married couple has about $30,000,000 combined before transfer taxes, plus inflation adjustments. 1
• Independent commentary confirms the policy intent: OBBBA makes permanent the expanded exemption and increases it to $15M per decedent, indexed annually. 2

Strategic planning moves with a $15M+ exemption

Reassess lifetime gifting vs. testamentary transfers

• Revisit whether aggressive gifting done in anticipation of a reduced exemption is still necessary. With $15M+ per person, many estates can simplify and retain assets without transfer tax exposure, while still considering lifetime gifting to remove future appreciation. 2
• If you previously used complex irrevocable structures under the expectation of a lower exemption, consider whether discretionary “decanting” or permitted trust modifications make sense to better align with current goals. Note the IRS historically treats modifications carefully for gift/GST effects; keep changes non‑taxable and within governing instrument and state law authority. 3

Preserve step‑up in basis and avoid inadvertent estate inclusion

• Assets included in a decedent’s gross estate generally receive a basis adjustment under §1014 at death; structuring to preserve inclusion for basis may be desirable where there is no estate tax exposure under the higher exemption. The IRS has flagged basis step‑up issues for grantor trusts when assets are not includible in the estate—plan carefully to avoid uncertainty. 4

Coordinate marital deduction structures

• QTIP trusts remain a core tool to control disposition while securing the marital deduction. Elections can be partial; you may divide a trust into separate fractional shares to reflect a partial QTIP election, enabling optimal use of exemption and marital deduction. 5
• If the surviving spouse is not a U.S. citizen, a Qualified Domestic Trust (QDOT) is still required for a marital deduction; be mindful of the QDOT estate tax on principal distributions and at the surviving spouse’s death, and compliance conditions for U.S. trustee certifications and administration. 6 7 8

Portability and DSUE for married couples

• Consider electing portability of any unused exclusion (DSUE) on a timely filed Form 706 even if no tax is due. If not otherwise required to file, the IRS offers a simplified late election method within five years of death; estates at or above the filing threshold are not eligible for this simplified relief. 9

GST tax alignment

• The GST exemption is generally unified with the estate/gift exemption. If you leveraged automatic or affirmative allocation strategies pre‑2026, review inclusion ratios and applicable fractions to ensure trusts remain GST‑efficient under the new exemption levels. 10

Fiduciary income tax and trust design considerations

Income taxation of estates and trusts

• Trusts and estates file Form 1041; choose accounting periods and methods that clearly reflect income. Watch the compressed trust tax brackets and estimated tax obligations. 11 12
• The 3.8% net investment income tax applies at the trust level on undistributed net investment income in excess of the top bracket threshold; trustees should manage DNI/distributions to optimize overall tax burden. 13

Caution on “abusive trust” arrangements

• The IRS continues to target abusive trust schemes purporting to eliminate tax or hide ownership. Transfers to trusts can be completed gifts and, if enjoyment or income is retained, the assets can be pulled back into the gross estate under §2036. Use legitimate, documented strategies. 14 15

Post‑death administration protections

Automatic estate tax lien and personal liability

• An estate tax lien attaches at death to the gross estate for 10 years and can create personal liability for transferees/beneficiaries if the tax is unpaid. Plan liquidity, consider special use valuation, and use discharge procedures when selling encumbered assets. 16 17

Three‑year lookback for certain transfers

• Transfers within three years of death interact with several estate provisions (e.g., lien, §2032A special valuation, and §303 redemption). Review any late‑life transfers and life insurance owned or transferred close to death. 18

Estates and fiduciaries practicals

• The moment of death starts the estate’s tax year; executors choose the first return’s tax period, must handle basis consistency, and coordinate beneficiaries’ consistent treatment. 19

Noncitizen spouse planning with QDOTs

When a QDOT is needed and how it’s taxed

• If the surviving spouse is not a U.S. citizen, a marital deduction is generally available only via QDOT. Distributions of principal during the spouse’s lifetime and the value of property remaining at the spouse’s death are subject to estate tax under §2056A(b). 6 7
• Structural and compliance requirements (U.S. trustee, bond/letter of credit in some cases, binding compliance statement) are key to ensure the marital deduction is allowed. 8
• If the surviving spouse later becomes a U.S. citizen and timely notices the IRS, the ongoing §2056A(b) tax regime can terminate; the IRS has granted deadline relief under Reg. §301.9100 where appropriate. 20 21

Charitable and related planning ripple effects post‑2025

Corporate charitable giving change

• Starting with tax years after 2025, a 1% floor applies to corporate charitable contribution deductions (with related FIFO and carryforward rules). This mainly affects C‑corporations but can be relevant for family entities in broader estate plans. 22

Individual charitable giving environment

• Independent analyses note a new 0.5% of AGI floor for itemized individuals beginning in 2026, impacting timing and bunching strategies in personal planning alongside estate plans. Coordinate with donor‑advised funds and private foundation rules.

Ancillary planning notes that intersect with estates

529-to-ABLE rollovers preserved

• Tax‑free rollovers from 529 plans to ABLE accounts are extended for tax years beginning after 2025; this can complement special needs planning in revocable and supplemental needs trusts. 23

Action checklist for 2026 and beyond

Update your estate plan design

• Recompute projected estate tax with the $15M+ exemption and inflation indexing; right‑size lifetime gifts, SLATs, GRATs, ILITs, and installment sales to grantor trusts under new thresholds. Document goals if maintaining structures.
• For married clients, blend exemption use with QTIP portability strategies; consider partial QTIP and trust division to fine‑tune tax and control. 5

Reconfirm beneficiary tax posture and basis management

• Where estate tax exposure is eliminated, consider intentionally including low‑basis assets in the estate to capture §1014 basis adjustment, while avoiding unintended §2036 inclusion from retained interests. 14 4

Portability and Form 706 practices

• File Form 706 to elect portability whenever feasible; if not required to file by threshold, consider the simplified late election within five years if initially missed. 9

QDOT decisioning (if spouse is not a U.S. citizen)

• Verify QDOT eligibility and trustee requirements at the first death; model the cost of QDOT tax on principal distributions and at spouse’s death versus citizenship planning and the termination rules. 6 7

Administrative safeguards

• Plan for the 10‑year estate tax lien and transferee liability where tax could be due, especially with illiquid assets; coordinate redemptions and special use valuation or installment payment strategies as needed. 16

Want tailored recommendations?

• Share your approximate net worth, marital status and spouse citizenship, current trust structures (ILITs, SLATs, grantor trusts), anticipated liquidity needs, charitable goals, and whether portability was elected at any prior death. I’ll build a prioritized plan to optimize exemption use, basis step‑up, marital/GST alignment, and trust income tax outcomes under the post‑2025 rules.

Sources

1 – One Big Beautiful Bill Act Sec. 70106. Extension and enhancement of increased estate and gift tax exemption amounts 📄 Summarize
2 – Tax Foundation 📄 Summarize
3 – PLR-115398-21 📄 Summarize
4 – Rev. Proc. 2016–3 📄 Summarize
5 – Treasury Regulation 20.2056(b)-7 📄 Summarize
6 – IRC § 2056A(b) 📄 Summarize
7 – Treasury Regulation 20.2056A-5 📄 Summarize
8 – Treasury Regulation 20.2056A-2 📄 Summarize
9 – IRS.gov – Frequently asked questions on estate taxes 📄 Summarize
10 – IRS.gov – Instructions for Form 706-GS(T) (11/2021) 📄 Summarize
11 – IRS – Instruction 1041 Instructions for Form 1041 and Schedules A, B, G, J, and K-1, U.S. Income Tax Return for Estates and Trusts 📄 Summarize
12 – IRS – Form 1041-ES Estimated Income Tax for Estates and Trusts 📄 Summarize
13 – Treasury Regulation 1.1411-3 📄 Summarize
14 – IRS.gov – Abusive trust tax evasion schemes – Law and arguments (Section IV) 📄 Summarize
15 – IRS.gov – Abusive trust tax evasion schemes – Talking points 📄 Summarize
16 – IRC § 6324(a) 📄 Summarize
17 – Treasury Regulation 301.6324-1 📄 Summarize
18 – IRC § 2035(c) 📄 Summarize
19 – IRS – Publication 559 Survivors, Executors and Administrators 📄 Summarize
20 – PLR-128364-18 📄 Summarize
21 – REG-119683-22 📄 Summarize
22 – One Big Beautiful Bill Act Sec. 70426. 1-percent floor on deduction of charitable contributions made by corporations 📄 Summarize
23 – One Big Beautiful Bill Act Sec. 70117. Extension of rollovers from qualified tuition programs to ABLE accounts permitted 📄 Summarize

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