As family offices enter 2026, they confront significant shifts in tax policy, fiduciary law, and regulatory frameworks. With the implementation of the One Big Beautiful Bill Act (OBBBA), which was enacted on July 4, 2025, key aspects of the private wealth landscape have been reset. This article highlights ten critical legal issues that family offices should prioritize this year, focusing on emerging opportunities and potential pitfalls.
OBBBA: A Comprehensive Reset for Private Wealth
The OBBBA fundamentally alters the planning environment for family offices by permanently extending or restructuring several provisions from the Tax Cuts and Jobs Act (TCJA). Key features include permanent individual tax rate extensions, an increased state and local tax cap through 2029, enhanced Section 199A qualified business income deductions, and a new regime for “Trump Accounts.” Consequently, family offices must transition from a reactive to a proactive planning approach, optimizing strategies around tax elections and philanthropic cash flow without the previous urgency linked to potential expirations.
A critical aspect of the OBBBA is the amendment of rules governing itemized deductions under Section 68. Concerns have emerged regarding whether this change has inadvertently created double taxation for trusts and estates distributing deductible amounts to beneficiaries. The American College of Trust and Estate Counsel (ACTEC) has urged Congress and the IRS to address these ambiguities.
Transfer Tax Planning: The $15 Million Unified Exemption
Effective January 1, 2026, the OBBBA solidifies the unified federal estate, gift, and generation-skipping transfer (GST) tax exemption at $15 million per individual, indexed from 2027. This change stabilizes multi-generational wealth transfer strategies and alleviates the pressure of “sunset risk” tied to temporary exemptions. Nevertheless, family offices should remain vigilant about potential future legislative changes that could affect these exemptions.
Proper planning remains essential, particularly in shifting wealth to irrevocable grantor trusts outside taxable estates. The permanence of the exemption allows for more deliberate planning, without the urgency previously required to act before statutory deadlines.
IRS Scrutiny on Grantor Retained Annuity Trusts (GRATs)
The IRS has intensified its examination of GRATs, exemplified by the Elcan case. Here, the IRS issued deficiency notices totaling over $736 million to spouses involved in GRATs, asserting that their initial contributions were fully taxable gifts. The case underscores the need for family offices to carefully evaluate the risks associated with GRAT transactions and the implications of substitution powers.
The taxpayers in the Elcan case are currently contesting the IRS’s position in the US Tax Court, arguing that their transactions adhered to regulatory guidelines. As the IRS continues to scrutinize GRATs, family offices may need to reassess their strategies involving these trusts.
Emergence of Trump Accounts for Minors
Beginning in 2026, new “Trump Accounts” will be available for individuals under 18, allowing annual contributions of $5,000, with specific investment constraints and a one-time federal credit for qualifying births. While these accounts present opportunities for tax-advantaged savings, uncertainties remain about their qualification for gift and GST tax exclusions. ACTEC has called for guidance on this matter, which family offices should monitor closely.
Changes to Section 529 Plans
The OBBBA expands qualified education expenses under Section 529, increasing annual K–12 distribution limits from $10,000 to $20,000 and adding new qualified postsecondary credentialing expenses. While these adjustments enhance planning flexibility, family offices must also consider state tax regulations, as these do not always align with federal definitions of qualified distributions.
Marital Trust Planning and Recent Court Decisions
Recent rulings, including the Anenberg and McDougall cases, offer important insights into marital trust planning. These decisions clarify that certain trust terminations do not trigger deemed gifts when properly structured, but they also introduce complexities in gift taxation that family offices must navigate.
The Griffin case highlights the critical importance of affirmative elections for QTIP treatment, suggesting that meticulous care is needed in the establishment and management of marital trusts.
Importance of Proper Documentation in Promissory Notes
The Estate of Galli case illustrates the necessity of correctly documenting interfamily promissory notes. The court upheld the validity of a loan due to proper interest payments and substantiation of transactions, thereby affirming the importance of meticulous record-keeping in financial dealings within families.
Implications for Family Entities and Liquidation Rights
The Estate of Fields decision serves as a cautionary tale regarding the risks associated with funding family limited partnerships shortly before death. The court’s ruling emphasizes the need for family offices to address non-tax purposes and governance within closely held entities to mitigate exposure to estate tax liabilities.
Qualified Small Business Stock (QSBS) and Enhanced Exclusions
Amendments to Section 1202 under the OBBBA provide for enhanced exclusions of gain on QSBS. These changes underscore the importance of adhering to requirements regarding domestic C corporations and shareholder holding periods to maximize tax benefits.
Qualified Opportunity Zones (QOZ) Framework Enhancements
Beginning in 2027, the OBBBA introduces a revised QOZ framework, offering significant tax advantages for investments in designated zones. Family offices must prepare for the December 31, 2026 deferred gain inclusion date, ensuring they optimize their strategies to leverage the new benefits while addressing any potential tax liabilities.
In summary, as family offices navigate the evolving legal landscape in 2026, they must adapt to the new realities introduced by the OBBBA and related developments. By prioritizing key legal issues and remaining proactive in their planning, family offices can effectively manage risks and seize opportunities in an increasingly complex environment.
