Hi,
The 2025 tax law permanently changed the rules for estates and trusts, and 2026 is the first year those new rules are fully in effect. With December 31 about 9 weeks away, the decisions you make before year-end will shape what your trust or estate owes in April.
Here’s what changed for 2026:
- The estate, gift, and GST tax exemption is now 15 million per person (30 million per married couple). It no longer “sunsets”, and it rises with inflation starting in 2027.
- The annual gift exclusion stays at $19,000 per person ($38,000 for married couples), and gifts must be completed by December 31 to count for 2026.
- Trusts still hit the top 37% tax bracket at just $16,250 of income, compared with over $640,000 for an individual, and the 3.8% net investment income tax applies at that same level.
- The new 35% cap on itemized deductions may now apply to estates and non-grantor trusts, which can reduce the value of charitable and other deductions.
- The state and local tax (SALT) deduction cap rose from $10,000 to $40,000, which changes how much non-grantor trusts can deduct.
What to do before these deadlines:
- December 31, 2026: finish annual exclusion gifts and any larger lifetime gifts, and review income distributions to beneficiaries, who are usually in a much lower bracket than the trust
- January 15, 2027: fourth-quarter estimated tax payment for trusts and estates
- March 6, 2027: last day for the 65-day election, which lets distributions made in early 2027 count as 2026 distributions
- April 15, 2027: Form 1041 trust and estate income tax returns are due (unless extended)
The catch is that many estate plans were written for a $7 million exemption that never came. Formula clauses, credit shelter trusts, and gifting strategies built for the old “sunset” may no longer do what you intended. That’s why we look at your trust documents, your tax returns, and your numbers together:
- Trust and estate income tax returns (Form 1041) and the K-1s for your beneficiaries
- Year-end distribution planning to keep income out of the trust’s 37% bracket where possible
- Gift tax returns (Form 709) and estate tax returns (Form 706), including portability elections
- Trust accounting and bookkeeping, so every distribution and expense is documented
- Personal tax returns for grantors, trustees, and beneficiaries, prepared alongside the trust’s return
Reply to this email by Wednesday and we’ll set up a free 15-minute call with our senior tax advisor to review your 2026 plan. Please bring your trust agreement or estate documents, last year’s Form 1041, and a list of any gifts or distributions made in 2026, so we can make your year-end decisions before December 31.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com