High Net Worth Tax Guide for Practitioners — 2026
Complete practitioner guide to high net worth individual taxation — estate planning, charitable giving strategies, family limited partnerships, grantor trusts, and alternative minimum tax. Updated for 2026.
Estate Tax Planning — The 2026 Sunset Issue
| Estate Tax Parameter | 2026 (TCJA) | 2026 After Sunset (under current permanent law (OBBBA)) | Planning Implication |
|---|---|---|---|
| Federal estate tax exemption | $13.99M per person | Approximately $7M per person (inflation-adjusted) | Urgency to use exemption before sunset |
| Gift tax annual exclusion | $18,000 per recipient (2024); $19,000 (2025) | Same (indexed for inflation) | Annual gifting program |
| Gift tax lifetime exemption | Same as estate tax exemption | Approximately $7M per person | Use exemption now via gifts |
| Top estate tax rate | 40% | 40% | Same rate |
| Portability | Available; elect on estate tax return | Available | File estate tax return to elect portability |
Source: IRC §2010; §2505; Rev. Proc. 2025-32 (2026 exemption); TCJA §11061
The TCJA doubled the estate and gift tax exemption from approximately $5.5M to $11.18M (indexed for inflation to $13.99M in 2026). Unless Congress acts, the exemption will revert to approximately $7M per person (inflation-adjusted) after December 31, 2025. High net worth clients who have not used their full exemption should consider making large gifts before the sunset — using the exemption now locks in the higher amount even if it later decreases.
Charitable Giving Strategies for High Net Worth Clients
| Charitable Strategy | Description | Best For | Tax Benefit |
|---|---|---|---|
| Donor-advised fund (DAF) | Contribute assets to DAF; recommend grants over time | Bunching deductions; appreciated assets | Immediate deduction; no capital gains on appreciated assets |
| Charitable remainder trust (CRT) | Transfer assets to CRT; receive income stream; charity gets remainder | High-income clients with appreciated assets | Deduction + capital gains deferral + income stream |
| Charitable lead trust (CLT) | Charity receives income stream; heirs get remainder | Estate planning; reducing estate | Estate/gift tax reduction; income tax deduction |
| Qualified charitable distribution (QCD) | IRA distribution directly to charity | Clients age 70.5+; high RMDs | Reduces AGI; satisfies RMD |
| Conservation easement | Donate development rights to land trust | Landowners; farmers | Deduction up to 50% of AGI (100% for farmers) |
Source: IRC §170; §664; §2522; §408(d)(8)
Donor-advised fund strategy: A donor-advised fund (DAF) allows a high net worth client to make a large charitable contribution in a high-income year (getting the full deduction) and then recommend grants to charities over multiple years. The client can contribute appreciated securities to the DAF — avoiding capital gains tax on the appreciation while getting a deduction for the full fair market value. DAFs are offered by Fidelity Charitable, Schwab Charitable, Vanguard Charitable, and community foundations.
Family Limited Partnerships and Grantor Trusts
Family limited partnerships (FLPs): An FLP allows a high net worth client to transfer assets to a partnership, retain control as the general partner, and gift limited partnership interests to family members at a discount. The discount reflects the lack of control and lack of marketability of the limited partnership interests — typically 20%-40%. This allows the client to transfer more assets using their gift tax exemption than if they transferred the assets directly.
Grantor retained annuity trust (GRAT): A GRAT allows a client to transfer assets to a trust, receive an annuity payment for a fixed term, and transfer the remaining assets to heirs estate-tax-free if the assets appreciate faster than the IRS hurdle rate (the §7520 rate). GRATs are most effective when interest rates are low and the transferred assets are expected to appreciate significantly. Case Study: William and Margaret H., ages 68 and 65. Combined estate: $28M. Without planning: estate tax at death: $5.6M (at 40% on amount above $13.99M × 2 = $27.98M). With planning: $10M in gifts to irrevocable trust (using remaining exemption); $5M to DAF (eliminating $1.5M in capital gains); FLP with 30% discount on $8M in real estate = $5.6M in gifts using only $5.6M of exemption. Total estate tax reduction: $4.2M. Practitioner fee: $45,000. ROI: 93:1.
Frequently Asked Questions
The information on this page is intended for licensed tax professionals (CPAs, EAs, and tax attorneys) and is provided for educational and research purposes only. Tax law is complex and fact-specific — all strategies discussed are subject to limitations, phase-outs, and conditions that may not apply to every client situation. Practitioners should independently verify all information against current IRS guidance, Treasury Regulations, and applicable state law before advising clients. This content does not constitute legal or tax advice.
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