Trusts and Estates Tax Updates for 2026

The One Big Beautiful Bill Act, enacted on 4 July 2025, removes uncertainty around the U.S. federal transfer tax exemption by permanently increasing the estate and gift tax exemption to $15 million per individual from 1 January 2026, with inflation adjustments beginning in 2027. Portability of unused estate and gift tax exemption between spouses will continue, although GST exemption portability remains unavailable, despite the GST exemption also increasing to $15 million. The maximum marginal tax rate for estate, gift and GST taxes remains at 40 per cent, and the annual gift tax exclusion for 2026 will remain $19,000 per recipient, or $38,000 for married couples.

From 2026, new charitable deduction rules will apply. Non-itemising taxpayers may claim an additional deduction of up to $1,000 for direct charitable gifts, or $2,000 for joint filers, alongside the standard deduction ($16,100 for single filers and $32,200 for joint filers), excluding donations to donor-advised funds or similar vehicles. For itemising taxpayers, charitable deductions will only be available to the extent they exceed 0.5 per cent of adjusted gross income, and taxpayers in the highest income bracket will have their deduction benefit capped at an effective rate of 35 per cent. In addition, New York’s estate tax exemption will increase to $7,350,000 from 1 January 2026, with estates exceeding 105 per cent of this threshold losing the exemption entirely and being taxed on their full value; portability of unused exemption between spouses remains unavailable.