Estate Planning and Trust Tax Strategies

Estate and trust taxation combines federal exemption thresholds, compressed trust brackets, gift tax rules, and generation-skipping strategy -- requiring coordination between your CPA and estate attorney.

The federal estate exemption is high but temporary. Under the One Big Beautiful Bill Act, the exemption is approximately $15 million per person for 2026. Estates below this threshold owe no federal estate tax, but state estate taxes may apply at much lower thresholds.

Gift tax has its own rules. You can give up to $19,000 per recipient in 2026 without filing a gift tax return. Gifts above that count against your lifetime estate exemption. Married couples can "split" gifts to double the annual exclusion, but this requires filing Form 709.

Trust income tax brackets are compressed. A trust reaches the top 37% federal bracket at roughly $15,650 in undistributed income for 2026. By comparison, an individual doesn't hit that bracket until $640,600. This makes the decision of whether to distribute income to beneficiaries a significant tax planning lever.

Generation-skipping transfer tax applies separately. Transfers to grandchildren or lower generations can trigger GST tax at a flat 40% rate, on top of estate or gift tax. The GST exemption mirrors the estate exemption, but it requires deliberate allocation.

The tradeoff: Estate and trust work often requires both a CPA and an estate attorney working in coordination. A CPA handles the tax filings and planning projections; the attorney handles the legal documents.