Families across America are quietly moving millions of dollars out of their estates before a looming tax deadline potentially cuts their options in half. The 2026 federal estate tax exemption sits at $15 million per person, or $30 million for married couples. That sounds like a comfortable cushion, but Congress may slash these numbers after 2026, prompting families to act now while the window remains open.
Wealthy families are racing to lock in today’s $15 million estate tax exemption before Congress potentially slashes it after 2026.
Trusts have become the go-to tool for this financial maneuvering. Unlike wills, trusts bypass probate entirely, keeping inheritance details private and allowing heirs to access their money quickly. Four out of five trusts reviewed in 2025 contained serious flaws, though, like missing provisions for cryptocurrency or online businesses. One family saved $163,000 in taxes and costs by updating their trust for just $8,000 in planning fees, a twenty-fold return on investment.
Different trust types serve different purposes. Irrevocable Life Insurance Trusts keep life insurance proceeds out of taxable estates. Spousal Lifetime Access Trusts lock in high exemptions while still allowing a spouse to access funds. Dynasty trusts use the $15 million generation-skipping transfer tax exemption to benefit grandchildren and beyond. These structures work especially well for families transferring assets expected to grow materially in value. Pot trusts allow trustees to allocate funds among children based on individual needs rather than forcing equal division at predetermined ages.
The math behind trust income taxes can sting, however. Trusts hit the 37 percent federal tax bracket once income exceeds just $16,000 in 2026. For comparison, a married couple filing jointly would need over $731,200 in income to reach that same rate. Smart planners distribute income to beneficiaries when possible, since those distributions reduce what the trust owes.
State taxes add another wrinkle. Twelve states impose their own estate taxes beyond federal requirements. Connecticut matches the federal exemption at $15 million but charges 12 percent on amounts above that threshold. Unlike federal rules, Connecticut offers no spousal portability, meaning unused exemptions vanish when one spouse dies.
The IRS has tightened enforcement since 2020, auditing outdated trusts more aggressively. Families waiting until after potential exemption cuts may face a 40 percent federal estate tax plus state taxes on amounts exceeding lower thresholds. Annual exclusion gifts of $19,000 per recipient in 2025–2026 allow married couples to transfer $38,000 per recipient annually without touching their lifetime exemption. Acting before 2026 ends could preserve millions for heirs rather than tax collectors. A timely trust move can also be influenced by central bank actions that affect asset values, since interest rates and monetary policy alter the growth assumptions on investments held in estates.
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