By Tort Law Team 
Nearly every high-net-worth family and professional advisor entered 2025 bracing for a dramatic drop in the federal estate tax exemption. That cliff never arrived. Instead, the One Big Beautiful Bill Act locked in a $15 million per-person exclusion starting in 2026, permanently. At the same time, finalized SECURE 2.0 rules for inherited IRAs took full effect, Corporate Transparency Act reporting obligations for most U.S. entities disappeared, and states continued modernizing trust governance and conflict-of-law rules.
This article delivers the latest trust law news that estate planning attorneys, wealth managers, financial planners, trustees, and beneficiaries need. You will find clear explanations of the statutory shifts, practical strategies for updating revocable living trusts and irrevocable structures, and guidance on heightened fiduciary duties and beneficiary rights. The goal is simple: equip you to revise plans with confidence before the next calendar year of administration begins.
The Permanent $15 Million Federal Estate and Gift Tax Exemption
The single biggest piece of trust law news in 2026 is the permanent elevation of the basic exclusion amount. Under the One Big Beautiful Bill Act (Public Law 119-21, also referenced in IRS materials as the Working Families Tax Cuts), the federal estate, gift, and generation-skipping transfer tax exemption stands at $15 million per individual for 2026. Married couples can shelter up to $30 million when portability is properly elected.
The amount will be inflation-adjusted beginning in 2027. The top rate remains 40 percent on amounts above the exclusion. Portability of the deceased spousal unused exclusion continues unchanged.
What This Means for Existing Plans
Many documents drafted between 2021 and 2025 contain formula clauses keyed to a projected post-2025 exemption of roughly $7 million. Those formulas can now produce unintended results. A typical credit-shelter trust funded with “the largest amount that can pass free of federal estate tax” may receive far more (or far less) than the settlor expected.
Practical step: Review every formula funding provision. Consider converting some credit-shelter trusts into disclaimer or Clayton QTIP structures that give the surviving spouse flexibility. High-net-worth clients who previously rushed lifetime gifts to “use it or lose it” can now slow the pace and focus on basis step-up planning and state estate tax exposure.
SECURE 2.0 Inherited IRA Rules Now Fully Operational
The IRS finalized regulations under the SECURE Act and SECURE 2.0 in mid-2024. Penalty relief for missed annual required minimum distributions ended after 2024. In 2026, non-spouse beneficiaries who are not eligible designated beneficiaries must empty an inherited IRA by the end of the tenth year after the original owner’s death.
If the owner died on or after the required beginning date, the beneficiary must also take annual distributions in years one through nine based on the applicable life-expectancy factor. Failure triggers the 25 percent excise tax (reducible to 10 percent if corrected promptly).
Trust Design Implications
See-through trusts remain essential. A properly drafted conduit trust passes each required distribution out to the individual beneficiary and preserves the 10-year (or longer for eligible beneficiaries) period. An accumulation trust can still work, but the trust itself is taxed at compressed rates: the 37 percent bracket begins at only about $16,000 of taxable income in 2026.
Action item for trustees: Confirm that every retirement account beneficiary designation still names the correct trust and that the trust instrument contains the necessary “see-through” language. Review distribution language against the final regulations so the trust does not inadvertently accelerate income into the highest brackets.
Corporate Transparency Act Reporting Permanently Scaled Back
In August 2026 FinCEN issued a final rule that permanently removes beneficial ownership information reporting obligations for U.S. companies and U.S. persons. Only certain foreign entities registered to do business in a U.S. state remain subject to reporting, and even those entities need not report U.S. person beneficial owners or company applicants.
Previously filed data relating to U.S. persons is being deleted from the FinCEN database. Trusts themselves were never reporting companies under the original rules, and the final rule confirms that domestic trusts and entities owned by domestic trusts face no federal BOI filing duty.
This development reduces compliance friction for family limited partnerships, LLCs held in revocable living trusts, and other common estate-planning vehicles. Advisors should still monitor any residual state-level beneficial ownership or entity transparency statutes that may apply independently of the federal CTA.
Modernizing Conflicts of Trust Law and Choice of Situs
At the 60th Heckerling Institute in January 2026, panelists highlighted ongoing work by the Uniform Law Commission on the Conflict of Laws in Trusts and Estates Act. The draft collapses outdated distinctions between real and personal property and between inter vivos and testamentary trusts. It emphasizes the settlor’s intent and the principal place of administration.
Under the emerging framework, a well-drafted choice-of-law and situs provision can control both validity and administration so long as the designated state has a substantial connection (trustee residence or place of business, or actual administration occurring there). The trustee may later transfer the principal place of administration, with the governing law shifting accordingly unless the instrument prohibits the change.
Drafting Recommendations for Multi-State Families
Include a modern situs clause that:
- Designates both governing law and principal place of administration.
- Applies uniformly to all trust property.
- Permits the trustee to change situs with notice to qualified beneficiaries.
- Addresses virtual representation and consent procedures under the new state statutes.
States such as South Dakota, Nevada, and Tennessee continue to compete on privacy, directed trusts, and asset-protection features. The new uniform conflicts rules will make forum shopping more predictable and reduce the risk of competing court orders.
Heightened Fiduciary Duties and Trust Governance Updates
Several states tightened trustee obligations effective in 2025–2026. Illinois now requires trustees to retain the governing instrument for seven years after termination and to conduct a reasonable search for unclaimed property before final distribution. Tennessee extended its Family-Owned Non-Corporate Entity franchise-tax exemption to entities owned by inter vivos trusts and strengthened confidentiality for court filings in pure trust-administration matters. California’s AB 565, effective January 1, 2026, codifies practical virtual representation rules that allow a qualified representative with aligned interests to consent on behalf of unborn, unascertained, or minor beneficiaries.
Across jurisdictions, courts continue to scrutinize conflicts of interest. A trustee who also serves as investment advisor or who holds a personal interest in a closely held business must document the decision-making process carefully. Many instruments now include explicit directed-trust or business-judgment-rule protections; those clauses should be reviewed against the new state statutes.
Beneficiary rights receive parallel attention. Notice and information requirements under Uniform Trust Code-inspired statutes are increasingly non-waivable. Trustees who fail to keep qualified beneficiaries reasonably informed face surcharge risk even when the trust instrument attempts to limit disclosure.
State-Level Probate and Small-Estate Reforms
Illinois raised its small-estate affidavit threshold to $150,000 (motor vehicles excluded) effective January 1, 2026. California continues to expand streamlined procedures for primary residences. Electronic wills are now authorized in more than a dozen states plus the District of Columbia; New York joined the list at the end of 2025. These changes reduce the need for full probate in modest estates and encourage greater use of revocable living trusts for privacy and efficiency.
Fiduciary Income Tax Complications Under New Section 68
The One Big Beautiful Bill Act replaced the old Pease limitation with a new 2/37ths reduction of itemized deductions for high-bracket taxpayers. The Joint Committee on Taxation Bluebook indicates that the limitation applies to estates and non-grantor trusts, treating the personal exemption equivalent and distribution deductions under Sections 651 and 661 as itemized deductions. Because the 37 percent bracket for trusts begins near $16,000, even modest trusts may face an unexpected haircut on distribution deductions.
Until Treasury or the IRS issues clarifying guidance, trustees should model both the traditional computation and the more conservative JCT interpretation when deciding on year-end distributions. Accelerating or deferring distributions by a few days can materially change the overall tax burden on the family.
Practical Action Checklist for 2026
- Update formula funding clauses to reflect the permanent $15 million exclusion.
- Confirm all retirement-account beneficiary designations and trust language comply with the final SECURE 2.0 regulations.
- Review choice-of-law and situs provisions against the emerging Uniform Conflict of Laws framework.
- Document any dual roles or potential conflicts of interest and obtain beneficiary consents or court approval where appropriate.
- Refresh notice and information policies to meet current Uniform Trust Code-style requirements.
- Model fiduciary income-tax projections under both traditional and Section 68-limited scenarios.
- For multi-state families, evaluate whether a change of situs to a more favorable jurisdiction is warranted under the new conflicts principles.
Conclusion
The 2026 landscape brings welcome certainty on the federal transfer-tax exemption, full implementation of inherited-IRA rules, and meaningful relief from Corporate Transparency Act burdens. At the same time, evolving conflicts-of-law principles, tighter fiduciary standards, and state-level modernization demand careful attention. Estate planning professionals and high-net-worth families who act now can lock in the benefits of the permanent $15 million exclusion while aligning trust administration and trust governance with the latest statutory expectations.
Consult a qualified estate planning attorney or tax advisor to review your specific documents and circumstances. The cost of a proactive update is almost always lower than the cost of correcting an outdated plan after a death or a trustee transition.
Frequently Asked Questions
Is the $15 million estate tax exemption really permanent?
Yes. The One Big Beautiful Bill Act removed the scheduled sunset and set the basic exclusion amount at $15 million for 2026, with inflation adjustments thereafter. Future Congresses can still change the law, but there is no automatic reduction.
Do I still need to worry about the 10-year rule for inherited IRAs?
Yes. Most non-spouse beneficiaries must fully distribute the account by the end of the tenth year. Annual RMDs apply in years 1–9 if the original owner had already reached the required beginning date. Penalty relief has ended.
Are domestic trusts or LLCs owned by trusts required to file beneficial ownership reports?
No. FinCEN’s final rule permanently exempts U.S. companies and U.S. persons. Trusts themselves were never reporting companies.
How should I update a choice-of-law clause in an existing trust?
Work with counsel to insert a modern provision that designates both governing law and principal place of administration, applies to all property, and allows a later change of situs with proper notice.
What is the biggest fiduciary risk in 2026?
Failure to keep qualified beneficiaries reasonably informed and to document decisions involving potential conflicts of interest. Many notice requirements are now non-waivable.
Does the new Section 68 limitation affect every trust?
It potentially affects non-grantor trusts and estates once taxable income reaches the 37 percent bracket (approximately $16,000). Guidance is still developing; conservative modeling is prudent.
Should high-net-worth clients still make large lifetime gifts?
The urgency of “use it or lose it” has diminished, but lifetime gifts still remove future appreciation from the taxable estate and can be useful for state estate-tax planning or asset-protection goals.
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