When the One Big Beautiful Bill became law, most business owners focused on one headline: the federal estate tax exemption increased.
Beginning in 2026, the federal estate tax exemption rises to $15 million per individual ($30 million for a married couple), indexed for inflation, and no longer has a scheduled sunset. For many families, that provides welcome flexibility and reduces the urgency to implement tax-driven estate planning strategies.
As an estate planning attorney, I certainly see this as positive news for many business owners. It gives families more freedom to make decisions based on what is best for their business and loved ones rather than racing against changing tax laws.
However, there’s another provision in the same legislation that has received far less attention—and for business owners with trusts as part of their business succession planning, it deserves a closer look.
The bottom line: The increased estate tax exemption is good news. But if your business succession plan includes one or more trusts, it’s important to understand how the new law could affect those trusts going forward.
The Lesser-Known Tax Change Affecting Trusts
The same legislation also introduced a new limitation on itemized deductions for taxpayers in the highest federal income tax bracket.
The calculation itself is technical, but the practical takeaway is more important.
Unlike individuals, trusts reach the highest federal income tax bracket at much lower income levels. As a result, many trusts may now be subject to these deduction limitations long before an individual taxpayer would be.
This is significant because many business succession plans rely on trusts to protect assets, transfer ownership, provide liquidity, or carry out long-term family planning goals.
While not every trust will be affected in the same way, the new rules make it worthwhile to review how each trust is structured and whether adjustments may be appropriate.
The bottom line: A trust that once operated efficiently under prior tax rules may deserve a fresh review under today’s law.
What This Could Mean for Your Business Succession Plan
Trusts serve many important purposes in business succession planning. Depending on your goals, they may be used to:
- Hold life insurance for buy-sell agreements
- Transfer ownership interests over time
- Protect business assets
- Provide liquidity during a transition
- Support family members after the owner’s death
- Help coordinate estate and tax planning
Because every trust is different, the impact of the new law depends on factors such as:
- The type of trust
- How much taxable income it generates
- How distributions are made
- The assets owned by the trust
- Your overall succession strategy
For some families, no changes may be necessary.
For others, adjustments to trust administration or distribution strategies may better accomplish the original planning goals while adapting to the new tax environment.
The bottom line: Business succession planning is not something you create once and forget. As tax laws change, your plan should be reviewed to make sure it still accomplishes what you intended.
Who Should Pay Attention?
Many business owners assume tax changes like this only affect ultra-high-net-worth families.
That is not always the case.
Depending on how they’re structured, trusts used in business planning may include:
- Irrevocable life insurance trusts
- Trusts that own business real estate
- Trusts holding ownership interests in closely held businesses
- Special needs trusts funded through business assets
- Other trusts that generate taxable income
If your business succession plan includes any trust that produces taxable income, it’s worth asking whether the new rules could affect it.
The answer will depend on your individual circumstances – not simply the size of your estate.
The bottom line: Even business owners with relatively modest trusts should consider reviewing their plans in light of the new law.
Why Regular Reviews Matter
One of the biggest misconceptions I see is that once estate planning documents are signed, the work is finished.
In reality, a business succession plan should evolve as:
- Tax laws change
- Your business grows
- Your family circumstances change
- Business valuations increase
- New assets are acquired
- Successors become more involved
A plan that worked perfectly five years ago may need updates today – not because it was drafted incorrectly, but because the world around it has changed.
That is why I encourage business owners to review their plans periodically rather than waiting until a crisis forces the issue.
What You Can Do Right Now
If your business succession plan includes one or more trusts, now is an excellent time to schedule a review.
As an estate planning attorney, I help business owners evaluate how their legal, insurance, financial, and tax strategies work together – not as separate pieces, but as one coordinated plan.
Many business owners already have an attorney, CPA, financial advisor, and insurance professional. What often gets overlooked is how those pieces fit together. A change in one area can unintentionally create gaps in another.
The goal isn’t simply to respond to new legislation. It’s to make sure the business you’ve worked so hard to build is positioned to transition the way you intend – for your family, your business, and the people who depend on both.
To learn more about our one-of-a-kind systems and services, contact us or schedule a 15-minute introductory call today. you love means planning with clarity – not guesswork.