Review trusts before 2026 estate tax changes

If you are a high-worth individual or couple living in Arizona, you may have to rethink the trusts in your estate plan. Starting in 2026, the lifetime federal estate tax exemption drops by more than half, necessitating flexibility in your chosen trusts.

Trusts to consider for estate tax exemptions

The estate tax exemption will fall to $5 million for individuals and $10 million for married couples. However, those figures are expected to be adjusted for inflation, increasing the amounts to $6.08 million and $12.16 million, respectively. Now is an excellent time to review the trusts in your estate planning portfolio because when you place assets in a trust, you technically do not own them.

Two trusts to consider adding to your portfolio are a SPAT, or a Special Power of Appointment Trust, and a SLAT, or a Spousal Lifetime Access Trust. With a SPAT, you appoint a trustee who provides access to your money without explicitly being named as a beneficiary. SLATs are popular with married couples as they allow each spouse to be a beneficiary of a trust formed by the other.

Another change you should pay attention to involves a reduction in the gift tax. The lifetime gift tax exclusion is scheduled to be halved in 2026, with estimates coming in at about $6.8 million. Note that gifts must be complete to be part of the gift tax exemption.

Reviewing your estate plan

Creating your estate plan is more than just a one-and-done deal. Life changes, income changes, and so does federal law. These factors necessitate reviewing the plan’s various elements, especially if you are a high-worth individual. Consider adding different trusts to your plan, some of which can provide income in your latter years ye save assets for your beneficiaries.

Depending on your unique situation, you may possibly incorporate various other trusts into your estate plan. These can include a charitable remainder trust, a qualified personal residence trust and a grantor-retained trust. Each of these strategic solutions provides a creative way to protect your legacy so you are assured that your assets will be distributed according to your wishes.