Missives

With the One Big Beautiful Bill Act (OB3) far more attention will be given to positioning assets to obtain an income tax basis adjustment on a decedent’s death, more so than shifting asset appreciation out of an owner’s estate with lifetime gifts to avoid federal estate taxes.

Adding a charity as a discretionary beneficiary of trust income is a simple advance planning strategy that can be used to minimize the trust’s exposure to high, confiscatory, federal income tax brackets.

A debate currently rages among commentators whether estates and non-grantor trusts are subject to the new 2/37th limitation on itemized deductions starting in 2026.

This Delaware decision is an important reminder to settlors who are potentially considering the adoption of a self-settled asset protection trust, but reluctant to do so due to the loss of control over the transferred assets. A fair amount of control can still be retained over the trust while still enjoying the trust’s protection from creditor claims.

A silent trust will prevent the trust beneficiary from making a qualified disclaimer for transfer tax purposes.

As we begin to plan for 2026, perhaps the first thing we need to look at will be the expected changes to the retirement plan contribution rules for 2026.

While the One Big Beautiful Bill Act (OB3) just expanded the IRC 199A deduction to more owners of closely held pass-through businesses, there are still some limitations to that qualified business income deduction (QBI) that are not readily apparent.

Many other provisions of the Tax Code were also changed by these inflation adjustments. You are encouraged to read the entire Revenue Procedure to learn how these other changes will affect income taxes in 2026.

The take-away from the recent 2026 Priority Guidance Plan is to not expect much guidance from the IRS in the gift, estate, and GST areas for the next 18 months. If questions remain on the interpretation of gift, estate or GST taxes, individuals, will be forced to request (and pay for) Private Letter Rulings.

In recent years the IRS, along with Congress, seems to be stepping up its challenges to the deductibility of claims filed against a decedent’s estate, with many more conditions and limitations on the amount of the deduction.