Five Estate Planning Areas That Deserve Renewed Attention in 2026

Five Estate Planning Areas That Deserve Renewed Attention in 2026

We hope this newsletter finds you well.  Many of you have been working with your accountant to prepare your 2025 tax returns (or extension for the same).  It is an opportune time to review your estate plan and consider these five critical items during that review.  We’ll cover each topic in more detail in future blog posts throughout the year.  While no single list applies to every individual or family, the following topics are areas where we are increasingly seeing gaps or outdated assumptions in existing estate plans.

1. Trustee Selection and Trustee Preparation

Why This Matters More In 2026 Than In The Past

Perhaps the most important choice one can make in creating their estate plan, other than choosing the beneficiaries of the estate, is selecting the successor trustee.  After all, your successor trustee will not only handle the distribution of your estate, they will also be handling your financial affairs in the event you become incapacitated.  For most non-professional trustees, serving as a trustee has always been challenging.  If you have had the pleasure of serving as trustee, you are likely nodding your head.  Unfortunately, trustees serving in 2026 face an even more demanding environment.  In our experience, individuals serving as trustees today may encounter:

• • Increased fiduciary liability exposure
  • More complex tax reporting and compliance obligations
  • Greater likelihood of beneficiary conflict
  • Longer trust durations (i.e., dynasty trusts)
  • Heightened scrutiny by beneficiaries and advisors

Given the above, when deciding the best successor trustee for your estate, a renewed emphasis should be placed on conducting a thoughtful trustee suitability analysis.  Such analysis will help you decide if the trustee being considered is really the right person for the job.

After you complete this analysis and have chosen your successor trustee, the next step is to prepare the trustee for the job so they can more effectively step in when needed.  Having a “Red File” (see item 4) and a Letter of Wishes (see item 5) can immensely help your successor trustee.  In an upcoming article, we will explore what a proper trustee suitability analysis looks like and how you can best prepare your successor trustee for the job that awaits.

2. Incapacity Management: Planning for the Living

Why Incapacity Planning Has Overtaken Death Planning In Urgency

Since the probability of an extended period of incapacity is much more likely now than in the past, it is critical to stress-test your estate plan while you are still healthy.

Key questions to ask include:

• • How is incapacity determined? (By certification of two doctors, one doctor, and/or an incapacity panel?)
  • When does authority actually shift? (Is the power of attorney effective immediately or upon doctors’ certifications?)
  • Which document controls which asset upon incapacity? (Document/asset mapping?)
  • Will the financial institutions accept the documents such as powers of attorney? (Banks often refuse to accept attorney-drafted forms that are non-conforming with the bank’s specific requirements. Confirming ahead of time that a bank will accept the power of attorney is prudent.)
  • Does it make sense to add the successor trustee as an immediate co-trustee?

Future blog focus: How to stress‑test incapacity planning and avoid institutional roadblocks.

3. Tax Planning: Beyond the Federal Estate Tax

Why Tax Planning In 2026 Is Broader—And More Fragmented

A key development driving renewed focus on tax planning in 2026 is the federal tax law enacted in 2025 (the One Big Beautiful Bill Act or “OBBBA”). Under this law, the federal gift, estate, and generation‑skipping transfer (GST) tax exemptions each increased to $15 million per person as of January 1, 2026, and are indexed for inflation annually. Unlike prior exemption increases, these exemptions do not currently contain an automatic sunset provision. That said, like any tax law, they remain subject to change by a future Congress and administration. As a result, thoughtful tax planning in 2026 requires balancing the opportunities created by historically high exemptions with the reality of future legislative uncertainty.

In the past, tax planning often centered almost exclusively on mitigating the federal estate tax. With larger federal estate tax exemptions, many estates will never be subject to estate tax.  Obtaining a stepped-up cost basis on assets at death can be one of the most important tax benefits to a family.  Many irrevocable trusts designed for estate tax avoidance were put into effect years ago and contain appreciated assets.  Without special planning, the assets in these irrevocable trusts will generally NOT receive a stepped-up cost basis at the death of the creator of the trust.  The absence of a stepped‑up cost basis on appreciated trust assets can result in significant and sometimes unexpected capital gains tax exposure, particularly when estate‑tax savings are no longer a driving concern.  Whether and how these planning opportunities apply depends heavily on the terms of the governing documents, asset composition, and evolving tax law, and should be evaluated on a case‑by‑case basis.

Future blog focus: Stepped-Up Basis Planning and Coordinating income, property, estate, and GST tax planning in modern estate plans.

4. Creating a “Red File” and Digital Life Organizer

Why Your Trust Documents Are No Longer Enough

When a person becomes incapacitated, what often creates chaos is not missing legal documents, but rather failing to have a roadmap that organizes critical information for your successor trustee and health care agent.

In 2026, effective planning includes a practical, accessible system for:

• • Legal documents
  • Financial accounts
  • Advisor contact information
  • Digital assets (including crypto) and password management
  • Guidance for fiduciaries and family members

This “Red File” or digital life organizer bridges the gap between legal planning and real‑world administration.  If you would like to receive our latest Red File – Digital Life Organizer, please email us at cvaldez@trustplanner.net.

Future blog focus: What to include in a modern Red File or digital life organizer—and how to keep it current.

5. Including a Letter of Wishes

More revocable living trusts call for the creation of long-term irrevocable trusts for children, grandchildren, and other beneficiaries that can span decades or longer.  If your estate plan includes a long-term trust (often coined “dynasty trusts”), strongly consider including a purpose clause in the trust, combined with a non-binding letter of wishes to the trustee. The purpose clause states your reasons for creating the trust and what you are trying to accomplish (i.e., your intent).   Your letter of wishes complements the purpose clause and helps guide the trustee to administer the trust as you would if you were alive.  A well-drafted purpose clause and thoughtful letter of wishes can be incredibly helpful for your successor trustee and reduce conflict.  This is especially true if the trustee is a professional trustee with no relationship to the beneficiary.  With a carefully crafted purpose clause and letter of wishes, your trustee can more easily justify distributions (or not making distributions in certain cases).

Future blog focus: How to Make an Effective Letter of Wishes. 

Heightened Importance for Blended Families and Business Owners

Each of these five areas becomes significantly more critical if you have a blended family and/or own a closely-held business.

Reviewing Your Estate Plan

We strongly encourage you to review your plan, especially if it has been more than five years since you have conducted the last review.  An estate plan that was sound five years ago may now be outdated due to changes in the laws or changes in your life.  It is critical to review your estate plan so that it protects you and your family in the way you intended. Please email rbusching@trustplanner.net to learn about our estate planning review process and schedule your review.

DISCLAIMER

The information provided in this newsletter is for general informational and educational purposes only and does not constitute legal or tax advice. Estate, incapacity, and tax planning strategies are highly dependent on individual facts, goals, assets, family circumstances, and applicable law, and no topic discussed herein is intended to apply universally to every reader.

Any references to tax laws, exemptions, basis adjustment, or planning concepts are based on current law as of the date of publication and are subject to change, potentially with retroactive effect. This newsletter should not be relied upon as a prediction of future tax outcomes or as a substitute for individualized legal or tax advice.

This publication is directed solely to clients and prospective clients and is not intended as guidance for trustees, agents under powers of attorney, health care agents, or other fiduciaries, each of whom should seek independent legal advice regarding their duties, authority, and potential liabilities.

References to digital assets, account access, password management, or organizational tools are for general discussion only. Our firm does not request, receive, or store client passwords or access credentials through newsletters or informal communications, and readers should not transmit sensitive information via unsecured means.

Receipt of this newsletter does not create an attorney‑client relationship. Readers should not act on the information contained herein without first consulting a licensed attorney or other appropriate professional regarding their specific situation. Attorney Advertising.