The short answer
In 2026 each person can pass $15 million free of federal estate and gift tax, and the One, Big, Beautiful Bill Act made that higher exemption permanent and indexed for inflation. The annual gift exclusion is $19,000 per recipient. Amounts above the exemption are taxed at up to 40%.
Why owners still plan when the exemption is high
A company that is worth $8 million today may be worth far more after growth or a sale. Moving shares out of the estate before that growth, while values are lower, keeps the future appreciation out of the taxable estate. Trusts also control who receives what, protect assets and keep decisions orderly if something happens to the owner.
Common trusts business owners use
- SLAT (spousal lifetime access trust). One spouse gifts assets to a trust for the other spouse and family, using exemption while the family keeps indirect access.
- GRAT (grantor retained annuity trust). The owner transfers assets and receives an annuity for a set term; growth above an IRS interest rate passes to beneficiaries with little or no gift tax.
- IDGT (intentionally defective grantor trust). Assets, often business interests, are sold or gifted to a trust that is outside the estate for estate tax but taxed to the owner for income tax, so the owner’s tax payments further shrink the estate.
- Dynasty trust. A long-term trust, allocated generation-skipping transfer exemption, that can hold assets for several generations.
- Charitable structures. Charitable remainder trusts, donor-advised funds and charitable LLCs can pair giving with income or estate planning.
What to have in place first
- A current valuation of the business.
- An operating agreement or shareholder agreement that allows transfers to trusts.
- Wills, powers of attorney and a succession plan for running the company.
- Coordination with any planned sale, since transfers usually work best before a deal is signed.
2026 federal transfer tax figures
| Amount | |
|---|---|
| Estate and lifetime gift exemption | $15 million per person |
| Married couple, combined | $30 million |
| Annual gift exclusion | $19,000 per recipient |
| Top estate and gift tax rate | 40% |
Questions owners ask
Is the $15 million exemption going to drop back?
Under current law, no. The One, Big, Beautiful Bill Act set the exemption at $15 million for 2026 and made it permanent, indexed for inflation. Congress can still change it in the future.
When should a business owner set up trusts?
Often before a liquidity event, when the business can be transferred at a lower value. Trusts take time to draft, fund and value, so starting a year or more before a sale is common.
Sources
- IRS: Estate tax
- IRS: Frequently asked questions on gift taxes
- IRS: One, Big, Beautiful Bill provisions
This guide is general information, not legal, tax or investment advice for your situation, and it may not reflect changes in the law after the date above. Talk to a qualified professional before acting on it.
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