Big Tax Changes Are Coming for Estate Plans in 2026

Families who don’t update their estate plans could face real financial consequences

A wide range of legal changes will go into effect next year that will have a big impact on estate planning and tax implications for many people in the future, according to WealthManagement.com’s analysis of the impending estate planning changes.

The estate planning changes result from the passage of federal Public Law (PL) 119–121, also known as the One Big Beautiful Bill Act, which was enacted into law on July 4 this year. So what is the new law? How will it change estate planning regulations next year? And what are the tax implications of such changes?

Creation of ‘Trump Accounts’ and how they work

One of the changes instituted by the One Big Beautiful Bill Act was the creation of “Trump Accounts.” These are tax-advantaged savings vehicles for minors, similar in spirit to education-focused 529 plans but not limited to education expenses.

Starting January 1 next year, families can create a Trump Account to save money for children under 18. Families can contribute $5,000 each year in after-tax contributions to a child’s Trump Account until the child is 18 years old. Once the child reaches 18, the account must be converted into an IRA account.

And like certain types of IRAs, such as a ROTH IRA, that money can grow tax-free, meaning it can often be withdrawn without paying taxes. The goal of Trump Accounts is to help families build long-term savings for children. In addition, U.S. citizens born between 2025 and 2028 will receive a $1,000 federal grant to deposit in their Trump Account.

New limitations on itemized deductions

Another estate planning change that will go into effect next year is the reinstatement of a limitation on itemized deductions. In simple terms, high-income taxpayers won’t be able to use all their deductions to reduce their tax bill.

Specifically, the new rules reduce itemized deductions by a formula that cuts them by “2/37ths.” The goal is to ensure people in the top tax bracket don't get the full 37 percent tax benefit from their deductions, capping it at around 35 percent instead.

• Who the limit actually affects – Even though Congress aimed this rule at people taxed at 37 percent, the formula can affect others, too. For example, someone with income made up of long-term capital gains or qualified dividends—taxed at 20 percent—could still lose part of their deductions if their total income is high enough to cross the 37 percent bracket threshold.
• How this affects trusts and estates – The new rules apply to individuals, trusts, and estates. But lawmakers said they intended only to limit the deductions individuals can take, not those unique to trusts or estates. Because the wording in the Act isn’t precise, the limit may reduce deductions that trusts and estates normally rely on.

For example, when a trust distributes income to a beneficiary, the trust usually deducts the distribution. If the new limit reduces that deduction, part of the same income can be taxed twice—once to the trust and once to the beneficiary.

New QSBS Modifications

The Act significantly updates the “qualified small business stock” (QSBS) rules for stock issued on or after July 5, 2025. The changes were created primarily to help investors in small companies potentially avoid paying taxes on a large portion of their gains when they sell the shares of their company.

Specifically, the Act increases the maximum exclusion to $15 million and raises the gross assets threshold from $50 million to $75 million, with inflation adjustments beginning in 2027. It also introduces a tiered structure that allows partial exclusions for stock sold after shorter holding periods, including a 50 percent exclusion after three years, 75 percent after four years, and 100 percent after five years.

Despite the enhancements, several areas require further clarification. One issue concerns companies that previously exceeded the $50 million asset threshold under the old rules but remain below the new $75 million limit. It is unclear whether stock issued by such companies after July 5, 2025, qualifies as QSBS.

There is also uncertainty around how inflation adjustments interact with the tiered exclusion amounts once a taxpayer has already used part of the exclusion. Because the Act does not specify how these adjustments should apply, investors and advisors may be confused when determining eligibility or calculating benefits. Until the U.S. Department of the Treasury clarifies these issues, estate planners and business owners will need to navigate the new provisions cautiously.

How can an Arizona estate planning lawyer help me?

The rules and regulations governing estate planning often change from year to year. That’s why it’s critical that individuals fully understand the tax implications and other important considerations when creating an estate plan for themselves or their children.

Our legal team at the Law Firm of Brown & Jensen in Arizona is well-versed in the state and federal laws governing estate planning in Arizona and nationwide. As a result, we can explain the tax implications of different types of estate planning options depending on your family’s specific situation.

Contact us to learn more about your legal options. Schedule an appointment with an Arizona estate planning attorney focused on your family’s best interests. We have eight offices conveniently located throughout Arizona, including offices in Mesa, Tucson, and Scottsdale.

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