Trusts & Estate Planning

The 2026 “Dynastic Wealth” Bill:

Why Estates Between 3.5 and 15 Million Are Squarely in the Crosshairs of this Proposed Legislation

In March 2026, Democratic Senator Chris Van Hollen introduced S. 4196, the Strengthen Social Security by Taxing Dynastic Wealth Act, a proposal that would dramatically reset federal estate and gift taxes starting in 2027. While the bill is often described as targeting “ultra‑wealthy” families, the most immediate impact would fall on estates in roughly the 3.5–15 million per‑person range; families who are affluent but not necessarily thinking of themselves as “dynastic.”

For these households, the key planning question is not just what the bill does, but when. The timing of the proposed changes creates a powerful, but time‑limited, opportunity to act before the end of 2026.

Where We Are Today: Historically High Exemptions Through 2026

Under current law, the lifetime federal estate and gift tax exemption for 2026 is projected to be about 15 million per person, or 30 million for a married couple, with a top transfer‑tax rate of 40%. That means many well-off families, especially those with estates between 3.5 and 15 million per person, are outside the reach of federal estate tax entirely.

These historically high exemption levels are scheduled to stay in place through December 31, 2026, under current law. For planning purposes, this gives clients one more year where very large lifetime gifts can be made without triggering federal transfer tax, so long as those transfers are completed before year‑end 2026.

What S. 4196 Would Do Starting in 2027

S. 4196 would essentially turn the clock back to the 2009 transfer‑tax regime and redirect the resulting revenue into Social Security. The core changes are straightforward but severe for upper‑middle‑market estates.

• Estate tax exemption reset: The federal estate tax exclusion would drop to 3.5 million per individual (7 million for a married couple), with a top rate of 45%.
• Gift tax decoupled and capped: The unified structure would be broken; lifetime gifts would receive only a 1 million exemption for gift‑tax credit purposes.
• Effective date: These new rules would apply to estates of decedents dying and gifts made after December 31, 2026.

For families with net worth between roughly 3.5 and 15 million per person, the difference is dramatic: an estate that today would pass free of federal tax could face a sizable 45% estate tax on amounts exceeding the new 3.5 million threshold if S. 4196 becomes law.

The “Use It or Lose It” Window: Why 2026 Is Critical

One of the most important features of S. 4196 is what it does not do: it does not claw back valid large gifts made in 2026 under today’s elevated exemption. Large lifetime transfers completed before January 1, 2027 can still use the current 15 million per‑person unified credit, even though future gifts would be capped at 1 million.

In practice, this sets up a two‑stage planning framework:

• Stage 1 – Before December 31, 2026:
  Families can make substantial gifts, often into irrevocable trusts, using the current high exemption, removing future appreciation from their taxable estates while incurring no immediate transfer tax.
• Stage 2 – After December 31, 2026:
  Assuming S. 4196 or a similar regime is in effect, only a 1 million lifetime gift exemption remains for fine‑tuning, not for large transfers. At death, everything above the 3.5 million estate exemption per person is exposed to estate tax at rates up to 45%.

For an estate in the 10 million range, the difference between fully using the 2026 exemption versus doing nothing could be measured in millions of dollars of estate tax under the proposed rules.

Why the 3.5–15 Million Range Is So Exposed

Families above about 15 million per person are already planning around federal estate tax and typically have sophisticated structures in place. By contrast, households in the 3.5–15 million band often assume they will stay below any realistic federal estate‑tax threshold and may not have done extensive transfer‑tax planning.

S. 4196 changes that calculus overnight:

• • Estates between 3.5 and 15 million per person, which are untaxed today, become fully taxable above the 3.5 million mark.
  • Closely held business interests, operating companies, ranches, and real estate portfolios that were never modeled for federal estate tax could suddenly need liquidity solutions to pay a 45% tax on value above the exemption.
  • Because the proposal dedicates all estate, gift, and generation‑skipping transfer tax revenue to a unified Social Security Trust Fund, those taxes may become politically harder to roll back in the future.

In other words, this is the group most likely to be caught by surprise, unless they make proactive use of the 2026 planning window.

The New Gifting Landscape After 2026

The shift from a 15 million unified exemption to a 1 million lifetime gift cap fundamentally changes how gifting will work if S. 4196 passes.

Under today’s rules, a client can gradually or in one stroke shift tens of millions of dollars out of the taxable estate using the unified credit, relying on techniques like spousal lifetime access trusts (SLATs), dynasty trusts, and transfers of discounted entity interests. After 2026, the gift exemption would mainly serve as a tool for incremental clean‑up transfers, not for major wealth shifts.

That makes 2026 the decisive year for clients who want to:

• Move high‑growth assets, such as operating businesses, ranch or mineral interests, or concentrated equity positions, out of the taxable estate while values are still within the current high exemption; and
• Lock in today’s rules before the combination of a 3.5 million estate cap and a 1 million gift cap sharply limits what can be done later without incurring tax.

Advisors are already encouraging clients to treat 2026 as a rare “last call” moment for large‑scale lifetime planning.

What To Do Now

S. 4196 is still proposed legislation and may change, but it reflects a clear policy direction: lower exemptions, higher transfer‑tax burdens, and a tighter link between those taxes and Social Security funding. For families in the 3.5–15 million per‑person range, ignoring that direction could be costly.

Practical next steps include:

• Updating personal balance sheets and entity diagrams to understand current net worth and trajectory.
• Modeling estate‑tax exposure under both today’s rules and a 3.5 million / 45% S. 4196 regime.
• Identifying high‑appreciation assets that are strong candidates for 2026 lifetime gifts.
• Coordinating with legal, tax, and financial advisors to implement a gifting plan well before December 31, 2026.

The window is open now, but if S. 4196 moves forward and becomes law, that window closes at midnight on December 31, 2026.

While this proposed law may or may not become final, don’t wait to build appropriate estate planning, trust, and gifting strategies for your family. It’s essential to consult with an experienced estate planning attorney to determine the best approach for your specific circumstances and ensure your estate planning documents are properly prepared and legally sound. Mr. Michael A. Weaver, Partner at Saunders | Walsh, specializes in estate planning law and looks forward to working with your family to protect your legacy assets. Call us today to schedule your consultation with Mr. Weaver.

As an estate planning attorney, I’m often asked a simple question with a very complicated answer: “How much can I give away without paying gift tax?” The good news is that the tax law gives us several powerful pathways for making nontaxable gifts—if we understand and follow the rules.

These rules matter because every dollar you can transfer out of your estate tax‑free today can reduce future estate tax exposure and shift investment growth to younger generations. Using the strategies discussed below, it is entirely realistic for a committed grantor to move well into seven figures—often several million dollars of economic value—to or for a minor over 18 years, all without federal gift tax.

In this post, I’ll walk through:

• The federal annual exclusion for gifts
• Common “vehicles” for making nontaxable gifts (UTMA, 529 plans, certain trusts)
• Direct payment strategies that bypass the gift tax rules entirely
• The new opportunity: rolling unused 529 funds into a beneficiary’s Roth IRA
• What these tools can add up to over an 18‑year childhood

Annual Exclusion Gifts: Your First Line of Defense

Federal gift tax law allows you to make gifts each calendar year, to as many people as you like, up to the annual exclusion amount per recipient, without gift tax, without using your lifetime basic exclusion amount, and without any allocation of GST exemption. In 2026, that annual exclusion is $19,000 per donee; if you are married and elect to “split” gifts with your spouse, you can effectively double that amount to $38,000 per recipient.

To qualify for the annual exclusion, the gift must be a present interest—meaning the recipient has an unrestricted right to the immediate use, possession, or enjoyment of the property or its income. Outright gifts of cash or marketable securities typically qualify; gifts of “future interests,” such as remainder interests or highly restricted family business interests, often do not.

Over an 18‑year period, a single grantor who fully uses the annual exclusion for one child can transfer roughly $342,000 in present‑interest gifts; a married couple who splits gifts can move about $684,000, all outside the gift tax system. Done correctly, those annual exclusion gifts can also accomplish valuable income tax “shifting,” by moving income‑producing or appreciated assets to family members in lower income or capital gains brackets.

Common Vehicles for Nontaxable Gifts

While a simple check works, clients frequently want more structure or control around gifts. The tax law recognizes several vehicles through which annual‑exclusion and other nontaxable gifts can be made.

1. UTMA Accounts (Custodial Accounts for Minors)

Most states have adopted the Uniform Transfers to Minors Act (UTMA), which allows an adult custodian to hold property for a minor until a specified age, usually 21. A transfer to a UTMA account is treated as a completed gift, and, up to the annual exclusion amount, it normally qualifies as a present‑interest gift for gift tax and GST tax purposes.

Key features include:

• The custodian may use the property for the minor’s benefit during minority without regard to the custodian’s own support obligation.
• When the child reaches the statutory age, the remaining custodial property must be distributed outright to the child; if the child dies earlier, the property passes to the child’s estate.

One important caveat: if the donor also serves as custodian and dies while the custodianship is still in place, the value of the custodial property will generally be included in the donor‑custodian’s taxable estate.

2. 529 College Savings Plans

Contributions to a 529 plan are one of the most flexible ways to make nontaxable gifts for education. A 529 plan is a state‑sponsored qualified tuition program that allows contributions for a designated beneficiary, with tax‑favored treatment on investment growth when used for “qualified higher education expenses.”

Qualified expenses include tuition, fees, books, supplies, certain equipment (such as computers and related services), and room and board for eligible post‑secondary programs. Recent legislation expanded that concept to include substantial amounts annually for certain elementary and secondary education costs, including curriculum materials, tutoring, online learning platforms, educational therapies for disabled students, standardized test fees, and dual‑enrollment tuition.

From a gift‑tax standpoint:

• All contributions are treated as completed gifts to the beneficiary (even though the account owner retains control) and qualify for the annual exclusion and as nontaxable GST‑exempt gifts.
• You may elect to “front‑load” contributions in excess of the annual exclusion by treating a single large contribution as made ratably over a five‑year period for gift tax purposes.
• Contributions can be “split” between spouses, effectively doubling the planning leverage.

Generally, the value of the 529 account is excluded from the account owner’s gross estate, even though the owner can change beneficiaries and make limited investment choices. Distributions not used for qualified education are partially taxable and subject to a 10 penalty, with tax imposed on the distributee (beneficiary or owner), but this is often manageable with careful planning.

Given 18 years of funding, including possible five‑year front‑load elections, it is realistic for a family to accumulate a high‑six‑figure 529 balance for a single child, all within the annual exclusion framework.

3. Section 2503(c) Trusts for Minors

A Section 2503(c) trust is a special type of trust for beneficiaries under age 21 that allows gifts in trust to qualify as present‑interest gifts eligible for the annual exclusion. To qualify:

• The property and income must be available for distribution for the beneficiary’s benefit before age 21.
• The trustee’s discretion to distribute cannot be subject to a “substantial restriction” (broad standards like “welfare” or “happiness” are acceptable).
• Any property not expended must pass to the beneficiary at age 21 or be subject to a general power of appointment in the beneficiary if the beneficiary dies before 21.

Transfers within the annual exclusion amount qualify for both the gift tax and GST tax annual exclusions, but the trust property is included in the beneficiary’s estate at death, and may be included in the donor’s estate if the donor serves as trustee with broad discretionary powers.

4. Crummey Trusts

Crummey trusts use carefully drafted withdrawal rights to convert what would otherwise be future‑interest gifts into present‑interest gifts that qualify for the annual exclusion. Each beneficiary receives a limited right (typically for 30–90 days) to withdraw all or a portion of each contribution to the trust.

Key design considerations include:

• Limiting withdrawal rights to the greater of $5,000 or 5 of trust assets to avoid adverse “lapse” consequences for the beneficiary’s own estate; or using larger withdrawal rights paired with “hanging powers” so that lapses never exceed those thresholds in any year.
• Providing notice and a reasonable period for beneficiaries to exercise their rights; IRS rulings have approved 30–90-day withdrawal periods, and case law has focused on the legal enforceability of the right rather than actual exercise.
• Avoiding trust provisions that make withdrawal rights illusory or effectively unenforceable, the IRS has denied annual exclusion treatment when beneficiaries are barred from going to court or would be penalized for attempting to enforce their rights.

Crummey trusts can also be used in GST planning, but the GST annual exclusion is much more narrowly available when the trust has multiple beneficiaries or is drafted to avoid inclusion in any beneficiary’s estate, requiring careful GST exemption allocation.

Direct Payments That Bypass Gift Tax Entirely

Some of the most powerful “gifts” for tax purposes are never treated as gifts at all.

Section 2503(e): Direct Tuition and Medical Payments

Under Section 2503(e), payments made directly to an educational organization for tuition, or to a medical provider for qualifying medical care, are completely excluded from the gift tax rules—no annual exclusion usage, no reporting, and no GST allocation required.

Important points:

• There is no dollar limit on qualifying 2503(e) payments; they can be unlimited in amount and still avoid both gift and GST tax.
• The payment must be made directly to the school or provider; reimbursing a child for tuition or medical costs does not qualify and would instead be treated as a normal gift.

Over an 18‑year period, a high‑net‑worth family can easily pay several hundred thousand dollars or more of private K‑12, undergraduate, and even graduate tuition for a child through 2503(e), all outside the gift tax system and in addition to annual‑exclusion‑based planning.

You can combine 2503(e) payments with other techniques. For example, a grandparent might pay a grandchild’s tuition directly under 2503(e) while also making annual exclusion gifts to a 529 plan to cover non‑tuition expenses.^[18]

The New Opportunity: 529 Plan Rollovers to Roth IRAs

A particularly exciting development is the ability of a 529 beneficiary to roll over certain unused 529 funds into a Roth IRA in the beneficiary’s name, without income tax or penalties, if specific conditions are met. This rule, enacted as part of the SECURE 2.0 Act, turns overfunded college accounts into a long‑term tax‑free retirement asset for the next generation.

To qualify for tax‑free rollover treatment:

• The 529 account must have been maintained for at least 15 years.
• The rolled amount cannot exceed the aggregate contributions and related earnings made more than five years before the rollover date.
• The rollover must be completed via a direct trustee‑to‑trustee transfer.
• The amount rolled over in a given year cannot exceed the annual Roth IRA contribution limit, and total lifetime rollovers from that 529 to the beneficiary’s Roth IRA are capped at $35,000.

From an estate planning perspective, this means:

• Parents and grandparents can be more comfortable making aggressive 529 contributions, knowing that unused funds may later be redirected into a tax‑free retirement account for the beneficiary.
• Large 529 contributions—structured as annual exclusion gifts or five‑year front‑loaded gifts—can remove value from the donor’s estate, grow income tax‑free, and ultimately convert to Roth IRA dollars that are also tax‑free to the beneficiary in retirement.

The rollover itself is not treated as a new gift from the original 529 donor; once the gift is made into the 529, and the conditions are met, the beneficiary’s ability to shift a portion into a Roth IRA is a further tax benefit layered on top of an already effective wealth transfer.

Using All These Techniques Over 18 Years: What’s the Total?

When you combine:

• Roughly $342,000 (single grantor) or $684,000 (married, split‑gift) of annual‑exclusion transfers over 18 years to/for one minor, using a mix of 529, UTMA, 2503(c), and Crummey trust contributions;
• A high‑six‑figure 529 funding strategy that can cover education and ultimately feed up to 35,000 into a Roth IRA for the child;^[18]
• Unlimited direct 2503(e) tuition and medical payments, which, for private schooling and college alone, can easily reach several hundred thousand dollars or more;^[18]

You can realistically move well over $1 million, and in many cases several million, of economic value out of the grantor’s estate for the benefit of a single child over 18 years, with no federal gift tax.

The exact ceiling for a particular family will depend on:

• Whether one or two grantors are making gifts
• How aggressively they use front‑loading to 529s
• How expensive the child’s education and health‑care track is
• How the annual exclusion amount inflates over time

But the core takeaway for clients is straightforward: by stacking annual‑exclusion transfers, 529 plans (plus Roth rollovers), trust structures, custodial accounts, and 2503(e) tuition and medical payments, a thoughtfully designed plan can transfer a multi‑million‑dollar package of education, healthcare, retirement funding, and protected capital to a child from birth to adulthood—without triggering gift tax.

For families with significant wealth, that makes these nontaxable gift strategies some of the most powerful tools in the estate planning toolkit.

If you are considering designing a gifting strategy as part of your estate planning strategy, consult with a Texas estate planning attorney like Michael A. Weaver at Saunders | Walsh to ensure compliance and avoid costly mistakes.

 

1. Gifts-not-Subject-to-Gift-Tax.pdf
2. https://www.nelsonmullins.com/insights/blogs/tax-reports/all/2026-estate-and-gift-tax-update
3. https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes
4. Gifts-not-Subject-to-Gift-Tax.pdf
5. https://www.tiaa.org/public/invest/services/wealth-management/perspectives/529-to-roth-ira-rules
6. https://www.fidelity.com/learning-center/personal-finance/529-rollover-to-roth
7. https://www.savingforcollege.com/article/roll-over-529-plan-funds-to-a-roth-ira
8. https://www.kiplinger.com/taxes/gift-tax-exclusion
9. https://smartasset.com/estate-planning/gift-tax-explained-2021-exemption-and-rates
10. https://www.northerntrust.com/united-states/institute/articles/gifts-to-minors-strategies-for-effective-transfers
11. https://www.morganlewis.com/pubs/2025/10/irs-announces-increased-gift-and-estate-tax-exemption-amounts-for-2026
12. https://blog.taxact.com/gift-tax-supporting-adult-children/
13. https://www.schwab.com/learn/story/529-to-roth-ira-rollovers-what-to-know
14. https://www.citizensbank.com/private-banking/insights/estate-tax-exemption.aspx
15. https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax
16. https://www.merceradvisors.com/insights/family-finance/tax-free-gifting-in-2026-what-financial-givers-should-know/
17. https://www.adamsbrowncpa.com/blog/what-is-the-annual-gift-tax-exclusion-limit-for-2026/
18. Gifts-not-Subject-to-Gift-Tax.pdf

Funding Buy-Sell Agreements with Life Insurance
After Connelly v. United States

For closely held businesses, a well-drafted, properly funded buy-sell agreement is one of the most important—and most frequently mishandled—estate planning tools. A buy-sell sets the rules of engagement for what happens to an owner’s interest at death, disability, or departure and, when paired with life insurance, can provide the liquidity needed to keep the business and the family both financially secure.

But the Supreme Court’s decision in Connelly v. United States is a stark reminder that how you structure and fund that agreement can dramatically change the estate tax result. A buy-sell that looks fine from a corporate or succession-planning perspective can actually increase the taxable estate if the insurance and ownership mechanics are not carefully aligned with the valuation rules of the Internal Revenue Code.

Why Life Insurance Is the Workhorse Funding Vehicle

Most owners like the concept of a buy-sell agreement in theory. The friction usually arises around the question: “Where does the money come from to actually buy the deceased owner’s interest?”

Life insurance solves that problem elegantly:

• • • It creates immediate, liquid cash at the exact time it is needed; upon an owner’s death.
    • It avoids forcing the company or the surviving owners to borrow on unfavorable terms or fire-sale assets just to complete the buyout.
    • It converts an illiquid business interest into cash for the deceased owner’s family, which is often far more useful for a surviving spouse or heirs who are not involved in the business.

In short, insurance is not the agreement; it is the funding engine that allows the agreement to work under real-world stress. The legal and tax consequences, however, depend critically on who owns the policy, who is the beneficiary, and how the buy-sell is drafted.

Common Structures: Cross-Purchase vs. Entity Redemption

Although there are hybrids and variations, most life-insurance-funded buy-sell plans fall into one of two basic models: cross-purchase or entity redemption (entity purchase). Each has distinct ownership, tax, and administrative implications.

Cross-Purchase Structure

Under a cross-purchase arrangement:

• • • Each owner buys and owns a policy on the life of the other owner(s).
    • When an owner dies, the surviving owner(s) collect the death benefit personally and use it to purchase the deceased owner’s shares under the buy-sell agreement.
    • The surviving owners receive a basis step-up in the shares they purchased, which can be valuable if the business is later sold.

Advantages:

• • The insurance proceeds never sit inside the company itself, so they generally are not building the value of the corporation for estate tax purposes.
  • Surviving owners individually acquire more stock with a higher basis, which may reduce future capital gains on a sale.

Challenges:

• • • With more than a few owners, the number of policies required can become unwieldy (each owner needs policies on each of the others).
    • Premiums may not be perfectly “equal” if there are big age or health differences among owners.

Entity Redemption Structure

Under an entity redemption:

• • • The company owns policies on each owner’s life and is the beneficiary of those policies.
    • When an owner dies, the company receives the death benefit and uses those funds to redeem (buy back) the deceased owner’s shares under the buy-sell agreement.
    • The remaining owners’ percentage interests increase, but their tax basis in their shares does not.

Advantages:

• • • Administrative simplicity: the entity owns one policy per owner, pays the premiums, and handles any changes centrally.
    • Often easier to explain and implement for larger ownership groups.

Risks:

• • • Because the insurance proceeds are received by the entity, they increase the value of the company itself, which becomes a central issue for estate tax valuation.
    • If the agreement is not drafted and operated within the strict requirements of the valuation rules, the tax results can be far worse than expected.

The Connelly decision squarely focused on this entity-redemption model.

The Connelly Case: When the Insurance Creates the Tax Problem

In Connelly v. United States, the Supreme Court reviewed an estate tax dispute arising from a family-owned corporation that used a redemption-style buy-sell agreement funded with corporate-owned life insurance. The key facts, simplified:

• • • The corporation owned a life insurance policy on a shareholder’s life and was the beneficiary.
    • The buy-sell agreement provided that on a shareholder’s death, the corporation would redeem the deceased shareholder’s stock using the insurance proceeds.
    • For estate tax purposes, the estate argued that the corporate-owned life insurance should effectively be ignored or offset by the corresponding obligation to redeem the shares; i.e., that the insurance did not increase the value of the corporation for valuation purposes.

The Supreme Court rejected that argument. The Court held that:

1. 1. The life insurance proceeds received by the corporation are a valuable corporate asset that must be included in the fair market value of the company when determining the value of the decedent’s stock for estate tax purposes.
   2. The corporation’s contractual obligation to redeem the decedent’s shares does not reduce the value of the corporation in that valuation exercise. A redemption obligation is essentially an arrangement among shareholders, not a corporate liability that diminishes enterprise value in the eyes of a hypothetical willing buyer.

The result was harsh: the insurance increased the company’s value for estate tax purposes, thereby increasing the value of the decedent’s shares, even though those same insurance dollars were earmarked to redeem those shares. The estate ended up paying estate tax on a higher value while the actual economic benefit to the family did not increase proportionately.

In addition, the Court and the IRS looked closely at the buy-sell agreement itself. The agreement failed to meet the requirements under Internal Revenue Code Section 2703 for an agreement to control value for estate tax purposes:

• • • The agreement did not operate as a true, binding arm’s-length arrangement;
    • It was not consistently observed in practice; and
    • It did not provide a fixed or formula-based price that would be respected for valuation purposes.

Because the agreement was not respected as a bona fide price-setting mechanism, the IRS and the Court fell back to general fair market value principles, which included the insurance proceeds at full value.

The Estate Tax Risk of “Wrong” Structure

The lesson from Connelly is not that entity-redemption agreements are dead, but that they are dangerous if you assume the life insurance funding will be tax neutral at the corporate level.

The core estate tax risks include:

• • • Inflated Estate Value: When the corporation owns the policies, the death proceeds can significantly increase the company’s value at the moment of death, directly increasing the decedent’s taxable estate.
    • No Offset for Redemption Obligation: A contractual requirement for the company to redeem shares using those same proceeds typically will not reduce the corporate value for estate tax purposes. The estate may feel like the insurance “just passes through,” but for valuation purposes it is effectively an asset that boosts the company’s worth.
    • Unrespected Buy-Sell Price: If the agreement’s price mechanism is not carefully drafted, regularly updated, and actually followed, the IRS may disregard the stated price and instead use a higher fair market value, including the insurance.
    • Mismatch Between Economic and Tax Outcomes: The family may end up with the same economic result they always expected (cash for shares, surviving owners with 100% of the company), but with a significantly larger estate tax bill, reducing the net value transferred to heirs.

For closely held businesses where the business interest is the primary asset in the estate, that mismatch can be catastrophic.

Drafting and Structuring After Connelly: Practical Guidelines

Attorneys and advisors can still use life insurance to fund buy-sell agreements effectively, but the post-Connelly environment calls for more precision in structure and documentation.

1. 1. Be Intentional About Policy Ownership

Consider whether corporate ownership of the policies is truly necessary, or whether a cross-purchase or alternative structure (such as a separate LLC or trust to own policies) can achieve the same funding benefits with less estate tax exposure.

• • • For two or three owners, a traditional cross-purchase is often manageable and may keep the insurance proceeds out of the entity’s value.
    • For larger groups, look at techniques that centralize policy ownership outside the operating company rather than inside it.

1. 2. Tighten the Buy-Sell Agreement Under Section 2703

If you want the buy-sell to influence or control the value used for estate tax purposes, it must be drafted to meet the statutory and regulatory requirements:

• • • Use a clear, objective price mechanism (such as a regularly updated formula tied to earnings, EBITDA multiples, or independent appraisals) rather than vague or ignored valuation language.
    • Require periodic updates to the stated value or formula and document those updates; then actually transact at those values when triggering events occur.
    • Ensure the agreement is binding on the parties both during life and at death, and that it resembles an arm’s-length arrangement rather than a device to artificially depress estate values.

1. 3. Coordinate Insurance, Valuation, and Corporate Records

The buy-sell agreement, the insurance policies, and the corporate records (minutes, cap table, financial statements) must tell a consistent story:

• • • Confirm that policy ownership and beneficiary designations match the structure described in the buy-sell.
    • Ensure that financial statements properly reflect corporate-owned policies and that appraisers understand the treatment of those policies under current law.
    • Revisit both the agreement and coverage amounts as the business value changes; an outdated policy or stale valuation can be as dangerous as no planning at all.

1. 4. Model the Estate Tax Outcomes in Advance

For key owners, it is prudent to model:

• • • The projected value of the business with and without insurance proceeds at death.
    • The resulting estate tax liability under different structures (cross-purchase vs. entity redemption vs. external policy-owning entities).
    • The net amounts expected to pass to family members after tax under each approach.

These projections help owners understand that “simpler” is not always safer and that the short-term convenience of entity-owned policies may carry long-term estate tax cost.

Takeaways for Business Owners and Advisors

Life-insurance-funded buy-sell agreements remain a powerful way to combine business succession and estate planning. They provide liquidity when it is needed most and can prevent families from being forced into bad deals or litigation in the wake of an owner’s death.

The Connelly decision, however, is a reminder that the tax law does not always align with intuitive economics. When the entity owns the life insurance and is the beneficiary, those proceeds may increase the value of the decedent’s stock for estate tax purposes, even if they are immediately used to redeem that stock under a buy-sell agreement. If the agreement itself is not drafted and operated to meet strict valuation requirements, the IRS and the courts may ignore the nominal “buy-sell price” and impose tax on a significantly higher value.

For that reason, buy-sell agreements should be reviewed not only through a corporate or transactional lens, but through an estate tax lens. Aligning the structure (cross-purchase vs. entity redemption vs. alternative ownership vehicles), the insurance funding, and the valuation mechanics is essential to avoid turning what was intended as a tax-efficient succession plan into an estate tax trap.

If you have an existing buy-sell agreement funded with life insurance—especially if the corporation owns the policies—this is an excellent time to have it reviewed in light of Connelly and to confirm that the structure will produce the estate tax result you actually intend. Mr. Michael A. Weaver, Partner at Saunders | Walsh, specializes in estate planning and corporate law and looks forward to working with you to build buy-sell provisions in your Company Agreement that work. Call us today to schedule your consultation with Mr. Weaver.

When a Living Trust Owns a Texas Series LLC:

What Your Insurance Agent Really Needs to Know

 

When you combine a living trust, a Texas series LLC, and multiple lines of business insurance, you create a structure that is great for asset protection but confusing for insurance underwriting. This post walks through the key issues that come up when an insurance agent calls to “understand the disregarded entity tax structure” and how you, as counsel or advisor, can be ready with clear, consistent answers.

1. Who Really Owns and Controls the Business?

The first thing a business‑insurance agent wants to nail down is: who is the insured risk?

In a typical planning structure:

• The revocable living trust is the sole member of the parent LLC.
• That parent LLC establishes multiple series, each holding a specific asset pool or business line (for example, separate rental properties or operating ventures).
• The trustee—often the grantor—is the manager of the LLC and its series.

From an insurance standpoint, the key is to make sure:

• The parent LLC and the relevant series appear as named insureds or scheduled entities on the policy.
• The trust and the individual trustee/grantor appear as additional insureds (or co‑named insureds where possible).

This alignment reduces the risk that a claim is denied because the “real party” with liability or ownership was never properly named on the policy.

2. Disregarded Entities: Tax Fiction vs. Insurance Reality

For federal tax purposes, single‑member LLCs (including those owned by a grantor trust) are routinely treated as disregarded entities. In practice, that means:

• Each series’ income flows through the trust and onto the grantor’s Form 1040.
• The IRS looks through the LLC and trust and taxes the grantor directly.

Insurance carriers, however, do not underwrite tax fictions. They care about:

• Which legal entity holds title to the property or employs people.
• Where operations occur and who signs contracts and leases.
• Whose financial statements (often the grantor’s return plus entity‑level books) reflect the risk they are insuring.

The smart move is to explain to the agent that the tax treatment doesn’t change who owns assets or runs the business; it simply affects how income is reported. Then offer:

• EINs for each series and the parent LLC.
• A short explanation of how the grantor trust and disregarded entities report on the individual return.

This lets underwriting connect the dots between entity‑level exposures and the individual’s tax return they’ll often see in underwriting.

3. How Texas Series LLCs Affect Coverage Design

Texas series LLCs are popular for real estate and multi‑asset businesses because each series can hold its own assets and liabilities while sitting under a single umbrella LLC. For insurance, this raises several design questions:

• Should each series be treated as a separate “location” under one master policy, or as separate insured entities?
• Should there be one combined program (with clear scheduling of each series) or separate policies for each series?
• How should limits and umbrellas be structured to respect internal liability segregation while still providing practical coverage?

A common, practical approach:

• Use one coordinated program, with the parent LLC and each active series listed by name.
• Clearly schedule properties and operations under the correct series on the declarations and schedules.
• If certain series have meaningfully different risk profiles (e.g., high‑risk operations vs. passive real estate), consider separate policies or endorsements to avoid cross‑subsidization of risk.

The better you document which series owns what, the easier it is for the agent to avoid gaps.

4. Trust Ownership: Why It Matters to the Carrier

Trust ownership introduces two issues carriers care about: control and continuity.

With a revocable living trust:

• The grantor and the trust are economically the same person during the grantor’s life.
• However, the trust instrument governs what happens on incapacity or death—when a successor trustee steps in, and how business interests transition.

Insurance implications include:

• Ensuring the trust itself is recognized on the policy, so coverage continues seamlessly even if the grantor dies or becomes incapacitated.
• Ensuring the trustee (and any successor trustee) is recognized as having authority to act for the insured entities.
• Clarifying that any change in trusteeship or substantial amendment to the trust will trigger notice to the agent so the carrier can update the policy if needed.

When you proactively share a high‑level summary of the trust’s role—without revealing unnecessary private details—you reduce carrier anxiety about “mystery owners” behind the scenes.

5. Business Income, Payroll, and “Who Is the Employer?”

When agents ask about “the disregarded entity tax structure,” they are often really asking about:

• Whose income is at risk for business‑income and extra‑expense coverage.
• Who is the employer for workers’ comp, employment‑practices, and related coverages.

In a common arrangement:

• The payroll for each line of business runs through the specific series’ EIN, even though the series is disregarded for income‑tax purposes.
• The books and records track revenue, expenses, and payroll by series, then roll up through the parent LLC and ultimately to the grantor’s return.

For underwriting clarity, it helps to be ready with:

• Current payroll reports by entity/series.
• A brief explanation of where business‑income coverage should respond (e.g., at the series level, based on its own revenue).
• Confirmation that the tax “flow‑through” does not change which entity is responsible for payroll taxes and employment obligations.

This makes it easier to size limits and price the policy correctly.

6. Documentation and Communication Best Practices

To make these calls productive and avoid follow‑up confusion, it’s worth investing in a simple documentation package:

• A one‑page structure diagram showing the trust, the parent LLC, and each series with a short label (e.g., “Series A – Elm St. Rental,” “Series B – Equipment Leasing”).
• A brief written summary (1–2 paragraphs) explaining:
  • That the trust is a revocable grantor trust.
  • That each series is a single‑member LLC owned by the trust and treated as a disregarded entity.
  • That all income flows to the grantor’s Form 1040, but assets and operations are legally held at the entity/series level.
• A list of requested policy positions, such as:
  • Parent LLC and each series as named insureds or scheduled entities.
  • Trust and trustee as additional insureds.
  • Agreement to notify the agent on changes to trustees, series, or major operations.

Having this ready before the call lets you answer the agent’s questions consistently and gives the underwriter something concrete to work from.

7. How to Talk About “Disregarded” Without Losing the Agent

Finally, remember that “disregarded entity” is tax jargon. In conversations with agents:

• Emphasize that for legal liability, each LLC series still exists and owns assets or runs operations.
• Clarify that for tax reporting, those entities are ignored and everything flows to the individual grantor’s return.
• Tie every explanation back to what the carrier cares about: who owns the property, who operates the business, who employs people, and whose financials demonstrate the risk.

If you keep the focus on legal ownership, operations, and claims exposure, the tax‑classification piece becomes a simple background detail rather than a point of confusion.

 

Prepare Your Documentation Package Today

Don’t wait for the call from the underwriter. Proactively assemble the documentation package described in Section 6—including your structure diagram, high-level trust summary, and desired policy positions—to ensure a smooth, confusion-free underwriting process and avoid gaps in coverage. Need help? Contact Mr. Mike Weaver, Partner at Saunders | Walsh, today.  

High‑net‑worth Texans with more than 10 million dollars in assets often need more than a simple will—using a carefully drafted living trust can be the most effective way to protect wealth, control distributions, and streamline the transition to the next generation.

Why High‑Net‑Worth Texans Need More Than a Will

When your net worth exceeds 10 million dollars, your estate raises issues that a will alone is not designed to handle efficiently. A will must go through probate, which is public, can be time‑consuming, and can expose complex asset structures, business interests, and family dynamics to court oversight and potential disputes.

A living trust, by contrast, allows you to organize and manage significant assets during life, plan for incapacity, and transfer wealth at death with far less court involvement. It also provides a structure for sophisticated tax planning and family governance that is difficult to build into a will alone.

What a Living Trust Does for an 8‑Figure Estate

A revocable living trust is a legal arrangement where you (as grantor) transfer assets into a trust you typically control as trustee during your lifetime. You can amend or revoke it while you are alive and competent, and you name successor trustees and beneficiaries to step in at incapacity or death.

For estates over 10 million dollars, a living trust can:

• Consolidate control of diverse assets. Ranchland, closely held business interests, investment portfolios, mineral interests, and out‑of‑state real estate can be managed under one coordinated structure.
• Provide a clear succession path. Successor trustees can step in immediately upon incapacity or death, avoiding delays while the court appoints a personal representative.
• Keep your affairs private. Unlike a will admitted to probate, a trust generally remains a private document, which is important when significant wealth or business information is involved.
• Allow for phased and conditional distributions. You can direct when and how beneficiaries receive funds—age‑based steps, incentive provisions, education milestones, or protections against divorce and creditors.

Using Living Trusts to Address Texas‑Specific Issues

Texas community property rules and relatively streamlined probate can give a false sense of security, especially to affluent families. For larger estates, those rules do not prevent disputes or complexity; they simply define default outcomes if you do nothing.

A living trust lets you:

• Coordinate community and separate property. You can divide and title assets so that each spouse’s share is clearly identified and then placed into separate or joint trusts designed to meet tax and family goals.
• Avoid multiple probates. If you own real property in other states, placing those assets in your Texas‑centered trust can help avoid ancillary probate proceedings elsewhere.
• Manage business continuity. Operating agreements, buy‑sell provisions, and your trust can be synchronized so the trustee has clear authority to vote interests, manage entities, and execute transition plans if you die or become incapacitated.

Advanced Planning Within a Trust‑Centered Structure

For clients above 10 million dollars in gross assets, the living trust often becomes the hub for additional advanced strategies. While the trust itself is typically revocable during your life, it can be drafted to:

• Split into multiple sub‑trusts at the first spouse’s death. These may include a credit‑shelter or bypass trust to lock in use of that spouse’s federal exemption, and a marital trust to provide for the survivor while still protecting ultimate beneficiaries.
• Coordinate with irrevocable trusts. You may complement your revocable trust with irrevocable life insurance trusts, spousal lifetime access trusts, or intentionally defective grantor trusts designed to remove appreciation from your taxable estate.
• Implement generation‑skipping strategies. Proper trust design can preserve wealth for children and grandchildren while providing creditor and divorce protection and leveraging available transfer‑tax exemptions.

The result is a flexible “trust system” that can adapt as tax laws and family circumstances change, while keeping overall control anchored in a single, coherent structure.

How an Estate Planning Attorney Adds Value

Designing and funding a living trust for an 8‑figure estate is not a form exercise—it is a strategic project that should be led by an experienced Texas estate planning attorney. Your attorney can:

• Inventory and analyze your estate. This includes entity structures, community vs. separate property, qualified accounts, insurance, and existing agreements to determine what should be retitled into the trust and what should be coordinated by beneficiary designation.
• Draft a trust that fits your family. Provisions can address second marriages, children from prior relationships, special‑needs beneficiaries, business succession, and charitable goals, all tailored to your specific risk tolerance and values.
• Implement and maintain funding. The best trust in the world fails if assets are not properly titled to it; your attorney and advisory team help ensure deeds, account ownership, and assignments actually move your estate under the trust umbrella.
• Adjust the plan over time. As markets move, laws change, or your net worth grows, your attorney can help amend the trust or layer on additional irrevocable strategies, keeping your plan aligned with current law and your objectives.

For Texas families with estates over 10 million dollars, a living‑trust‑centered plan offers privacy, control, tax efficiency, and a smoother transition for the next generation. If your balance sheet is approaching or exceeding eight figures, now is the time to sit down with a Texas estate planning attorney and build a trust structure that protects your legacy and the people who depend on it.

If you live in Texas and have family, a home, a ranch, or a business, now is an ideal time to review your existing plan—or to put one in place for the first time—while today’s favorable federal exemption amounts are still available. An experienced Texas estate planning attorney, like Mr. Michael Weaver at Saunders | Walsh, can help you protect what you’ve built and make things easier for the people you love most. Call us today to schedule your consultation with Mr. Weaver.

 

Best Practices Every Texas Family Should Review in 2026

As a new year begins, Texans need to pause and make sure their estate planning reflects their current lives, families, and financial picture. A well‑crafted plan helps ensure that assets pass according to your wishes, medical decisions are honored, and loved ones are supported when it matters most.

1. Review Your Will and Any Trusts: Your will and any trusts are the cornerstone of your estate plan, and they should evolve as your life changes. Major events such as marriage, divorce, the birth or adoption of a child, a death in the family, or a significant change in assets often require updates.

When reviewing these documents, consider:

• • Whether beneficiaries are current and accurately named.
  • Whether specific gifts are still appropriate given your current assets and relationships.
  • Whether your chosen executor or trustee is still willing, able, and the best person for the role.

A periodic review with your attorney helps prevent unintended results and avoids confusion for your family later.

 

2. Update Powers of Attorney and Healthcare Directives: Financial and medical powers of attorney ensure someone you trust can act on your behalf if you become incapacitated. Without these documents, loved ones may be forced into court processes to manage your finances or make healthcare decisions for you.

Key questions to ask each year:

• • Are your named financial and medical agents still the right people to serve.
  • Do your healthcare directives clearly state your wishes regarding life‑sustaining treatment, organ donation, and end‑of‑life care.
  • Have you changed doctors or medical providers, and do your agents know how to contact them.

Refreshing these documents periodically helps your agents act confidently in line with your current values and preferences.

 

3. Revisit Life Insurance Coverage: Life insurance often plays a central role in providing financial stability for a surviving spouse, children, or other dependents. As your family and financial responsibilities grow or change, your coverage amount and structure may need to be adjusted.

During your review, consider:

• • Whether coverage is still sufficient given your income, debts, and long‑term goals.
  • Whether the policy beneficiaries match your estate planning documents.
  • Whether riders or supplemental benefits still fit your situation.

Coordinating beneficiary designations with your will or trust helps avoid conflicting instructions and unintended results.

 

4. Check Beneficiary Designations on Accounts: Many important assets pass by beneficiary designation rather than under your will, including retirement accounts, life insurance, and many financial accounts. If these designations are outdated, your assets may bypass your estate plan and go to the wrong person.

Each year, review:

• • Retirement accounts such as 401(k)s, IRAs, and pensions.
  • Bank, brokerage, and investment accounts with pay‑on‑death or transfer‑on‑death designations.
  • Any annuities or similar contracts with named beneficiaries.

Confirm that these designations are consistent with your overall estate planning strategy and current family situation.

 

5. Safeguard and Manage Precious Metals, Fine Art, and Gemstones: For clients with collections of precious metals, fine art, or gemstones, these assets deserve special attention in your estate plan. These items often hold both significant monetary value and deep personal meaning, and they require specific planning to ensure they are preserved, properly valued, and transferred according to your wishes.

Precious Metals (Gold, Silver, Platinum)

Inventory and Documentation: Maintain a detailed inventory of all precious metal holdings, including:

• • Type of metal and purity (for example, 14K gold, 999 silver).
  • Weight and quantity of each item.
  • Purchase date, price, and source of acquisition.
  • Current estimated value and date of valuation.
  • Location where items are stored.

Appraisal and Valuation: Have your precious metals professionally appraised by a qualified numismatist or precious metals dealer, and update appraisals every three to five years or after significant market shifts. Include copies of appraisals in your estate planning notebook so your executor and beneficiaries understand the value of what they are inheriting.

Storage and Security: Store precious metals in a secure location such as a safe deposit box, home safe, or insured depository vault. Document the location and provide your executor or trustee with access instructions, and review insurance coverage to confirm that these assets are adequately protected against loss or theft.

Tax Considerations: Precious metals are treated as collectibles for federal income tax purposes and may be subject to higher capital gains tax rates upon sale, so discuss with your tax advisor how a step‑up in basis at death and potential estate taxes should be handled in your plan.

Fine Art and Collectibles

Professional Appraisal and Documentation: Fine art should be appraised by a qualified art appraiser who specializes in your type of collection. A good appraisal will include a detailed description, photographs, provenance, condition, and a current fair market value with the valuation date, and should be updated periodically or when markets move significantly.

Insurance and Protection: Collections often need specialized fine art insurance that goes beyond standard homeowner’s coverage. Make sure the storage environment, security measures, and transit practices meet your insurer’s requirements to preserve both physical condition and coverage.

Succession Planning for Collections: Decide whether you want your collection to stay together, be divided among family members, donated, or sold, and identify which beneficiaries have the interest and capacity to care for specific pieces. Clear written instructions can reduce the risk of conflict and help preserve both value and family harmony.

Tax Planning and Charitable Contributions: Donating selected works to museums or charities can yield meaningful income tax deductions and may help reduce estate tax exposure, especially for high‑value collections. Coordinate these gifts with your overall estate, income tax, and philanthropic goals.

Gemstones and Jewelry

Professional Gemological Certification: Have significant gemstones certified by a reputable gemological laboratory so that carat weight, color, clarity, cut, and any treatments are clearly documented. Certification provides objective support for valuation, insurance, and tax reporting.

Comprehensive Inventory: Create a detailed inventory of jewelry and gemstone holdings that includes descriptions, photos, purchase dates and prices, current appraised values, locations, and insurance details. Keeping this inventory with your estate planning records helps your executor quickly understand what exists and how it should be handled.

Storage, Security, and Insurance: Store high‑value pieces in secure locations such as safe deposit boxes or high‑quality home safes and ensure that insurance coverage is sufficient for loss, theft, and damage. Provide your executor with clear instructions about where items are kept and how they can be accessed.

Family Communications and Heirlooms: If certain pieces are family heirlooms, consider documenting who should receive which item and why. This can be done through specific bequests in your will or a separate memorandum referenced by your estate plan to reduce misunderstandings and disputes.

Liquidity and Estate Administration: Because metals, art, and gemstones may take time to sell and can be volatile in value, discuss with your attorney how your estate will generate cash to pay taxes, debts, and expenses without forcing a rushed sale of prized items. Life insurance, cash reserves, or other liquid assets can provide breathing room for a thoughtful sales strategy.

Organize and Safeguard Important Documents: Even the most carefully drafted documents cannot help if no one can find them. Organizing and safeguarding your estate planning records makes it easier for your loved ones to act quickly and confidently in a crisis.

Consider:

• • Keeping originals in a fireproof safe, secure digital vault, or other protected location.
  • Ensuring your executor, trustee, or agents know where documents are stored and how to access them.
  • Maintaining an updated list of key documents, accounts, professional advisors, and asset inventories, including collections and appraisals.

6. Consider Tax and Lifetime Gifting Strategies: While Texas does not impose a state estate tax, federal estate tax rules may affect larger estates, especially those holding concentrated collections. Regular reviews with your advisors can keep your plan tax‑efficient.

Topics to discuss with your attorney and tax advisor include:

• • Whether your projected estate size could trigger federal estate tax.
  • Use of lifetime gifts to reduce the size of your taxable estate, including gifts of art or gemstones to family members or charities.
  • Coordination of charitable gifts with your overall planning.
  • Tax implications of passing collectible assets at death versus selling or gifting them during lifetime.

7. Do Not Overlook Digital Assets: Many people now hold meaningful value—sentimental or financial—in digital assets, such as online investment platforms, cryptocurrency wallets, and cloud‑stored records that may relate to your collections. Make sure someone you trust can access these accounts, passwords, seed phrases, hot and cold wallets and records when needed.

8. Address Special Family Circumstances: Families with minor children, beneficiaries with special needs, blended families, or beneficiaries who struggle with finances often require additional planning tools, such as special needs trusts or spendthrift protections. Your collections may need special handling in these contexts as well.

9. Schedule a Regular Estate Plan Review: Estate planning is not a one‑time event; it should grow as your life, assets, and goals evolve. Many Texans benefit from a full review every few years or after major life or financial changes, including significant changes in the value or composition of collections.

 

It’s essential to consult with an experienced estate planning attorney to determine the best approach for your specific circumstances and ensure your estate planning documents are properly prepared and legally sound. Mr. Michael A. Weaver, Partner at Saunders | Walsh, specializes in estate planning law and looks forward to working with your family to protect your legacy assets. Call us today to schedule your consultation with Mr. Weaver.

 

The Texas Estate Plan
How to Cut Taxes, End Heirship Disputes, and Avoid Probate in 2026

Why Estate Planning Matters in Texas

Without the right documents and strategies, your estate may face delays in probate, higher federal estate taxes, and disputes between heirs.

Unlike some states, Texas does not impose its own estate or inheritance tax, so most tax exposure for larger estates in 2026 comes from the federal system. Careful planning lets you use the updated 2026 federal exemptions, trusts, and lifetime gifts to keep more of your estate in the family instead of losing it to tax, probate, or litigation costs.

2026 Estate Tax Numbers Texans Need to Know

As of 2026, the federal estate and gift tax exemption is $15,000,000 per person, or $30,000,000 for a married couple that uses portability and coordinated planning. This exemption applies to transfers made during life or at death, and amounts above the exemption are still subject to federal estate or gift tax at rates up to 40%.

The federal annual gift tax exclusion for 2026 remains $19,000 per recipient, or $38,000 per recipient for a married couple that elects gift‑splitting. Gifts within the annual exclusion do not use any of your $15,000,000-lifetime exemption or require filing a gift tax return, which makes them a simple way to move value out of your future taxable estate over time.

Even if your projected estate is under these federal thresholds, planning still matters because poor asset titling, outdated beneficiary designations, or lack of incapacity documents can cause costly problems for families. Key tax drivers include the total value of real estate, investments, closely held business interests, and large lifetime gifts that have already used part of the lifetime exemption.

Using Trusts to Minimize 2026 Taxes and Protect Assets

Trusts remain one of the most flexible tools for Texans who want to reduce taxable estates, protect beneficiaries, and avoid probate under the 2026 rules. By placing assets into carefully designed trusts, you can remove future appreciation from your taxable estate, shield property from certain creditors, and set guardrails for how and when heirs receive their inheritance.

Common 2026 trust strategies include:

• • Revocable Living Trusts to keep assets out of court‑supervised probate, provide privacy, and make incapacity administration smoother while you retain control during life.
  • Irrevocable Trusts to remove assets (and future growth) from your taxable estate and add creditor and divorce protection for beneficiaries.
  • Charitable Remainder Trusts (CRTs) allow you to support favored charities, keep an income stream, and reduce the taxable value of your estate.
  • Grantor Retained Annuity Trusts (GRATs) that shift appreciating assets to the next generation at a reduced transfer‑tax cost if the assets outperform the assumed IRS rate.

With the 2026 exemption at $15,000,000 per person and indexed going forward, high‑net‑worth families can still use these techniques to “lock in” today’s high exemption while shifting additional growth to younger generations.

Strategic Gifting Under the 2026 Rules

Lifetime gifting remains an efficient way to shrink a taxable estate while helping family members when they actually need the funds. For 2026, you can give up to $19,000 per recipient per year (or $38,000 per recipient for a married couple that splits gifts) without using any of your lifetime exemption.

Larger gifts above the annual amount simply reduce your remaining $15,000,000 lifetime exemption, which can still be advantageous if you expect your estate to grow or want to take advantage of today’s historically high exemption before future legislative changes. Coordinated gifts to irrevocable trusts, 529 plans, or family entities can magnify these benefits while keeping structure and protection around the wealth.

Life Insurance, Asset Protection, and 2026 Planning

In 2026, life insurance continues to play a key role by creating liquidity to pay estate taxes, debts, and administration expenses, so real estate or business interests do not have to be sold in a rush. When held in an irrevocable life insurance trust (ILIT), the policy proceeds can stay outside the taxable estate while still being available to support heirs or equalize inheritances.

Beyond tax planning, Texans should also think about asset‑protection structures that work hand‑in‑hand with estate planning, such as LLCs and family limited partnerships for business and investment property, homestead protections for the primary residence, and spendthrift‑style trusts for beneficiaries who may need guardrails. Properly integrated, these tools can reduce risk from lawsuits, creditors, and divorce while preserving flexibility for legitimate business and family needs.

Avoiding Probate and Getting the Right Documents in Place

Keeping loved ones out of a drawn‑out probate process remains a core goal for many Texas families in 2026. That often means combining a revocable living trust with updated beneficiary designations, payable‑on‑death and transfer‑on‑death instructions for financial accounts, and transfer‑on‑death deeds for real property.

Every comprehensive Texas estate plan should still include:

• • A carefully drafted pour-over will that coordinates with any trusts and names guardians for minor and special needs children.
  • A statutory durable financial power of attorney and medical power of attorney so someone you trust can act if you are incapacitated.
  • A directive to physicians (living will) and HIPAA releases so medical providers can communicate with decision‑makers.

When these documents work together with 2026‑appropriate trust strategies, gifting, and insurance planning, families are far better positioned to minimize taxes and maximize what ultimately reaches the next generation under the new exemption regime.

 

 

It’s essential to consult with an experienced estate planning attorney to determine the best approach for your specific circumstances and ensure your estate planning documents are properly prepared and legally sound. Mr. Michael A. Weaver, Partner at Saunders | Walsh, specializes in estate planning law and looks forward to working with your family to protect your legacy assets. Call us today to schedule your consultation with Mr. Weaver.

 

 

Can You Electronically Sign Estate Planning Documents and Deeds in Texas?

As digital tools become increasingly essential in personal and business transactions, many Texans are curious about the possibility of executing estate planning documents—like living trusts, wills, powers of attorney, and deeds—using electronic signatures. Understanding what is legally valid and recordable is essential, as improper execution can have far-reaching consequences.

Living Trusts: Electronic Signatures Are Often Valid

In Texas, creating a living trust does not usually require witnesses or notarization unless specifically stated in the trust itself or required for transferring certain assets. State law generally permits electronic signatures on trust instruments. This means a living trust signed electronically by the settlor (and any acting trustees) will usually be considered valid. However, practical concerns—including banking or title company preferences—may still favor paper originals or notarized copies for certain transactions.

Wills: Texas Law Still Requires Wet-Ink Signatures

Despite the digital age, Texas law does not recognize electronically signed wills. The law requires that a will be in writing and signed with an actual, physical (“wet-ink”) signature. The presence and signature of two in-person witnesses are also required unless the will is self-proved with a notary, but even then, it cannot be an electronic execution. Electronically signed, witnessed, or stored wills are not legally valid in Texas at this time.

Durable Power of Attorney: Notarization Is the Key

A durable power of attorney (DPOA) grants broad authority to another person to act on one’s behalf. In Texas, for a DPOA to be legally effective, it must be notarized—an electronic signature alone, even if witnessed, is not enough. Texas does permit electronic notarization, provided all statutory safeguards are met (such as verified identity and audio/video recording of the notarial act). A DPOA without any form of notarization (electronic or traditional) is not valid and will be rejected by banks, title companies, and courts.

Deeds: Recordability Demands Notarization

Like DPOAs, deeds in Texas must be in writing and notarized to be valid and recordable. Electronic signatures on deeds may be accepted by county clerks only if the document has been properly notarized using an approved electronic notary platform. Without notarization, deeds cannot be recorded and will not achieve the intended legal effect. This is true even if everyone involved (grantor, grantee, witnesses) signs electronically—without notarization, the deed is legally incomplete.

Key Takeaways

• Living Trusts can generally be signed electronically and be valid.
• Wills must be ink-signed and witnessed in person; electronic wills are not recognized in Texas.
• Durable powers of attorney must be notarized to be effective; electronic signatures alone are not enough, but electronic notarization is permitted if done properly.
• Deeds conveying Texas real estate must be notarized—either traditionally or via a qualified electronic notary—or they cannot be recorded by the county clerk.

In summary, while Texas law supports certain uses of electronic signatures, for core estate planning and property documents, notarization remains critical, and traditional (“wet ink”) execution is necessary for wills. If you are considering digital execution of legal documents, consult with Texas estate planning attorney Michael, A. Weaver at Saunders Walsh to ensure compliance and avoid costly mistakes.

 

 

References:
Texas Estates Code, Electronic Signatures for Trusts
Texas Uniform Electronic Transactions Act (UETA), Electronic Notarization
Texas Estates Code for Wills & Powers of Attorney, County Recording Requirements for Deeds

 

Why Every Texan Needs a Durable Power of Attorney

Planning for the future is a vital step in securing peace of mind, and for Texans, one of the most important legal instruments to consider is a Durable Power of Attorney (DPOA). This document ensures that your financial and legal affairs are managed efficiently and effectively, even in the event of incapacity. Below, we explore why having a DPOA is essential and how it can protect your interests.

What Is a Durable Power of Attorney?
A Durable Power of Attorney is a legal document that allows you (the principal) to appoint someone you trust (the agent) to manage your financial and legal matters. Unlike a general power of attorney, the “durable” nature ensures that the agent’s authority remains effective even if you lose mental or physical capacity.

Key Benefits of a Durable Power of Attorney in Texas

• Continuity of Financial Management: A DPOA ensures that bills are paid, investments are managed, and assets are protected without interruption if you are unable to handle these tasks yourself.
• Avoiding Court Intervention: Without a DPOA, your loved ones may need to seek court-appointed guardianship to manage your affairs—a process that is time-consuming and expensive. A DPOA eliminates this need by granting authority directly to your chosen agent.
• Flexibility and Customization: Texas law allows you to tailor the powers granted in your DPOA. You can specify which tasks your agent can perform, from managing bank accounts to overseeing real estate transactions.
• Protection Against Exploitation: By appointing a trusted individual, you safeguard against potential financial abuse or mismanagement, particularly for vulnerable individuals like seniors.
• Estate Planning Integration: A DPOA complements other estate planning tools such as wills and trusts, creating a comprehensive strategy for managing your future.

Legal Requirements in Texas
To be valid in Texas, a Durable Power of Attorney must:

• Be signed by the principal in the presence of a notary public.
• Explicitly state its durability (i.e., it remains effective upon incapacitation).
• Clearly define the agent’s powers and responsibilities.

When Should You Create a Durable Power of Attorney?
The best time to establish a DPOA is when you are mentally competent and capable of making decisions. Waiting until health issues arise may complicate the process or even render it impossible due to legal competency requirements.

Choosing Your Agent Wisely
Selecting an agent is one of the most critical decisions when creating a DPOA. Your agent should be someone trustworthy, financially savvy, and willing to act in your best interests. Regularly reviewing and updating your DPOA ensures it aligns with your current wishes and circumstances.

In Texas, having a Durable Power of Attorney is more than just prudent—it’s essential. It provides continuity, security, and peace of mind by ensuring that your affairs are managed according to your wishes in the event of incapacity. Give us a call today to create or update your DPOA with our Estate Planning team. Your future self will thank you!

 

Are you a Texan looking to secure your legacy? Let’s talk about a lesser-known but powerful tool in estate planning: the pour-over will. This legal document could be the secret ingredient to ensuring your final wishes are carried out smoothly and efficiently.

What Is a Pour-Over Will?

A pour-over will is a special type of will that works in tandem with a living trust. It acts as a safety net, catching any assets that you might have forgotten to transfer into your trust* during your lifetime. Essentially, it “pours” these leftover assets into your trust upon your death, ensuring everything is distributed according to your trust’s instructions.

Why Texans Should Consider a Pour-Over Will

1. Simplicity and Organization
With a pour-over will, you can rest easy knowing that all your assets will end up in one place – your trust. This simplifies the administration of your estate and reduces the chance of assets slipping through the cracks.

2. Privacy Protection
Unlike traditional wills, which become public record during probate, a pour-over will keeps the details of your asset distribution private. Only the existence of the trust is made public, not its contents.

3. Flexibility During Your Lifetime
You can continue to manage and use your assets freely while you’re alive. The pour-over will ensures that anything you haven’t transferred to your trust by the time of your death will still be included in your overall estate plan.

How to Set Up a Pour-Over Will in Texas

1. Create a living trust
2. Draft a pour-over will with an experienced attorney
3. Regularly review and update both documents

Remember, while a pour-over will can be a valuable tool, it’s most effective when used as part of a comprehensive estate plan tailored to your specific needs and circumstances. Don’t let your hard-earned assets fall into limbo. Consider adding a pour-over will to your Texas estate plan and pour yourself a tall glass of peace of mind.

The Estate Planning team at SWB, headed by Mr. Michael Weaver, can help you secure your legacy and provide peace of mind for yourself and your loved ones.

Contact us today for a free 30-minute consultation.

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* The terms living trust and revocable trust are often used interchangeably, but there is a subtle difference:

• A living trust (also called an inter vivos trust) is any trust created and funded during the grantor’s lifetime. Living trusts can be revocable or irrevocable.
• A revocable trust is a specific type of living trust that the grantor can change or revoke at any time during their life. A revocable trust is always a living trust, but a living trust can be either revocable (changeable) or irrevocable (cannot be changed).

Don’t Let Your Texas Living Trust Become an Empty Shell
The Critical Importance of Proper Funding

You’ve taken the smart step of creating a living trust in Texas to protect your assets and provide for your loved ones. But here’s a crucial fact many overlook: a living trust is only as effective as the assets you put into it. Failing to fund your trust fully can leave your estate plan with dangerous gaps, potentially negating many of the benefits you sought to achieve.

The Pitfalls of an Underfunded Trust

Probate Perils
The primary purpose of a living trust is to avoid probate, but this only works for assets actually transferred into the trust. Any assets left out may still need to go through the time-consuming and potentially costly probate process, defeating a key advantage of your trust.

Loss of Control
If you become incapacitated, only the assets in your trust can be managed according to your wishes by your chosen successor trustee. Unfunded assets may require a court-appointed guardian, limiting your family’s flexibility.

Tax Troubles
Proper trust funding is essential for maximizing tax benefits. An underfunded trust may lead to unexpected tax liabilities for your estate and heirs.

Family Friction
Discrepancies between your trust document and unfunded assets can create confusion and potentially lead to disputes among your beneficiaries.

Anonymity
Having all of your assets owned in your personal name makes it easy for creditors and potential plaintiffs to find your exempt property. Using your living trust as an anonymity shield can be your first line of defense against third-party liability.

Don’t let your living trust leave your family with that hollow feeling! We will help you “fund your trust” by moving your assets from their current ownership into your living trust. The Estate Planning team at SWB, headed by Mr. Michael Weaver, can help you secure your legacy and provide peace of mind for yourself and your loved ones.

Contact us today for a free 30-minute consultation.

TRUSTS

NOT JUST FOR THE WEALTHY

A majority of people think that estate planning documents, such as trusts, are only for high-wealth individuals or families. As such, they might not often think about creating a trust, but there are still several reasons why having one could be beneficial, even on a smaller scale. Here are a few:

1. Asset Protection: A trust can help protect personal assets from creditors or other legal claims. This can be especially important if the individual faces financial hardship or legal challenges.
2. Medicaid Planning: For individuals who are aging or facing significant health issues, a trust can be used to help protect assets while qualifying for Medicaid or other public assistance programs.
3. Avoiding Probate: When someone passes away, their estate typically goes through probate, which can be a long and expensive process. A trust can help bypass this, allowing for a smoother transfer of assets to heirs or beneficiaries.
4. Ensuring Financial Support for Dependents: Even if someone has limited assets, they may want to ensure that dependents (like children, aging parents, or a spouse) are taken care of if something happens to them. A trust can specify how assets are distributed and ensure that those dependents are supported, even if the person has little wealth.
5. Control Over Distribution: With a Trust, an individual can specify exactly how and when their assets are distributed, which can be helpful if they have specific wishes, such as a gradual distribution to avoid making beneficiaries too wealthy too quickly.
6. Increased Financial Stability: For individuals with a modest income but some assets (e.g., a small home, life insurance policy, or savings), a trust can offer a way to manage and preserve wealth for the future, helping ensure that they leave something behind for loved ones.

Ultimately, a Trust can provide peace of mind for individuals, regardless of income, knowing their wishes will be honored and their assets protected. Our Estate Planning experts at Saunders, Walsh & Beard look forward to discussing this with you. To see what type of Trust would be best for your situation, give us a call today.

When it comes to estate planning in Texas, trusts offer several advantages over wills. Here’s why you might consider using a trust instead of a will:

Avoiding Probate

One of the most significant benefits of a trust is that it allows your heirs to avoid the probate process entirely. This can save them considerable time and money, as they won’t have to wait for approval from the probate court to inherit property. In contrast, a will must go through probate, which can be time-consuming and costly.

Enhanced Privacy

Unlike wills, which become public record once entered into probate, trusts remain private documents. This means that the details of your estate and beneficiaries are not accessible to the public, protecting your family’s privacy.

Flexibility in Asset Distribution

Trusts allow for more sophisticated asset distribution plans. You can specify conditions for asset distribution, such as beneficiaries reaching a certain age or achieving specific milestones. This level of control is typically not possible with a will.

Protection in Case of Incapacity

A trust can offer protection if you become disabled or incapacitated. By designating a trustee, your assets can be managed on your behalf, and your family can access them immediately. Wills generally do not provide this capability.

Reduced Potential for Disputes

Trusts are much more difficult to contest in court compared to wills. This can help avoid expensive and unnecessary fights among beneficiaries, ensuring your wishes are followed after your passing.

Special Needs Planning

If you have an heir with special needs, a trust can be particularly beneficial. It allows you to provide for them without disqualifying them from receiving important government benefits, which could happen if assets were left to them directly through a will.

Control Over Asset Distribution

With a trust, you can maintain control over how and when your assets are distributed. This is particularly useful in situations involving blended families or when you want to ensure responsible management of inherited assets.

While establishing a trust may be more complex and costly upfront than drafting a will, the long-term benefits often outweigh these initial drawbacks. Trusts provide a more flexible, efficient, and private means of managing and distributing your assets after your death, making them an optimal choice for many Texans.

Remember, while trusts offer many advantages, it’s essential to consult with an experienced estate planning attorney to determine the best approach for your specific circumstances and ensure your estate planning documents are properly prepared and legally sound. Mr. Michael A. Weaver, Partner at Saunders, Walsh & Beard, specializes in estate planning law. Call us today to schedule your consultation with Mr. Weaver.