Estate Planning in 2026: Wills, Trusts, Beneficiary Designations, and the New Tax Numbers

An estate plan decides who receives your assets, who manages them if you cannot, and who makes medical decisions for you when you are unable to. Without one, state law decides, usually through a probate court. Most families do not face federal estate tax in 2026, but they do face probate costs, beneficiary forms that override their wishes, and inherited retirement account rules that can produce large tax bills for heirs.

This guide covers the core documents, the will-or-trust decision with real probate cost numbers, the beneficiary designation traps, the 10-year rule for inherited IRAs, and the 2026 tax figures. For advanced trust strategies, see our trust planning guide; for protecting assets from creditors, our asset protection guide.

The core documents

• Will. Directs who receives assets that pass through probate, names an executor, and, if you have minor children, nominates a guardian. A will is the only document that can name a guardian.
• Durable financial power of attorney. Lets an agent manage your finances if you become incapacitated. Without one, your family may need a court conservatorship.
• Health care directive and HIPAA authorization. Names a health care agent, records your treatment wishes, and lets doctors share information with the people you choose.
• Beneficiary designations. Decide who receives retirement accounts, life insurance, and accounts with payable-on-death or transfer-on-death registration.
• Revocable living trust (optional). Holds assets during your life and passes them to beneficiaries at death without probate.

Will or revocable trust?

A revocable trust does not reduce estate tax or protect assets from your creditors, since you still control it. Its value is avoiding probate and handling incapacity.

An illustration: probate fees in California

California sets statutory probate fees by the gross value of the estate, without subtracting mortgages, under Probate Code section 10810: 4% of the first $100,000, 3% of the next $100,000, 2% of the next $800,000, and 1% of the next $9 million. For a home worth $1 million with a $600,000 mortgage:

• Attorney fee: $4,000 + $3,000 + $16,000 = $23,000
• Executor fee: the same schedule, another $23,000
• Total statutory fees: $46,000, plus court costs, on $400,000 of actual equity

Executors who are family members can waive their fee, but the attorney fee stays. In a state like California, a revocable trust usually costs far less than that. Many other states have simpler, cheaper probate, and small estates can often use a short affidavit procedure, so the case for a trust varies.

Funding the trust

A trust controls only what is titled in its name. Unfunded trusts are one of the most common estate planning failures: the documents are signed, but the house and brokerage accounts stay in the individual's name, and they go through probate anyway. Retitle real estate by deed, change bank and brokerage accounts to the trust's name, and keep a "pour-over" will to catch anything missed.

Assets that skip probate without a trust

• Beneficiary designations on IRAs, 401(k)s, annuities, and life insurance
• Payable-on-death and transfer-on-death registrations on bank and brokerage accounts
• Transfer-on-death deeds for real estate, available in many states
• Joint ownership with right of survivorship

Joint ownership with an adult child is a shortcut with side effects. The child's creditors or divorcing spouse can reach the asset, adding the child can count as a gift, and you need the child's cooperation to sell or refinance. A transfer-on-death registration usually does the same job without those problems.

Beneficiary forms override your will

Beneficiary designations are contracts with the account provider. The provider pays whoever is named on the form, whatever your will or trust says. The Supreme Court has enforced this strictly for employer plans covered by ERISA. In Egelhoff v. Egelhoff (2001), it held that ERISA overrides a state law that would have revoked an ex-spouse's designation after divorce. In Kennedy v. Plan Administrator for DuPont (2009), the plan correctly paid an ex-wife named on the form even though she had waived her rights in the divorce decree.

Rules to follow:

• Review every beneficiary form after marriage, divorce, a birth, or a death, and at least every few years.
• Name contingent beneficiaries, so the account does not fall back to your estate and into probate.
• For a 401(k) or other ERISA plan, your spouse is generally the default beneficiary, and naming anyone else requires the spouse's written, witnessed consent.
• Naming a trust as beneficiary of a retirement account can work, but the trust must be drafted for it; see the next section.

Inherited retirement accounts: the 10-year rule

Since 2020, most non-spouse beneficiaries must empty an inherited IRA or 401(k) by the end of the tenth year after the owner's death. The IRS's final regulations, which apply from 2025, add a further rule: if the owner had already reached the age for required distributions, the beneficiary must also take annual distributions in years one through nine (Grant Thornton summary). The IRS waived penalties for missed annual distributions from 2021 through 2024; from 2025, a missed distribution can trigger a 25% excise tax. Inherited Roth IRAs have no annual requirement but must still be emptied within ten years.

Some beneficiaries can still stretch withdrawals over their life expectancy: a surviving spouse, a minor child of the owner (until age 21), a disabled or chronically ill beneficiary, and anyone not more than ten years younger than the owner.

The tax effect is large for adult children in their peak earning years, since a big traditional IRA must come out over ten years on top of their salaries. Ways to plan for it include Roth conversions during the owner's lower-income years, leaving traditional IRA money to charity and other assets to family, and spreading withdrawals evenly instead of taking a lump sum in year ten. If a trust is the beneficiary, it must qualify as a "see-through" trust, and whether it passes distributions straight to the beneficiary (a conduit trust) or can hold them (an accumulation trust) changes the tax result.

Taxes in 2026

Federal estate and gift tax

Under the One Big Beautiful Bill Act, the federal basic exclusion is $15 million per person for 2026, indexed for inflation from 2027 with no scheduled sunset. The top rate above that is 40%. The annual gift exclusion is $19,000 per recipient, set by Revenue Procedure 2025-32.

Portability. A surviving spouse can use a deceased spouse's unused exclusion, but only if the executor files an estate tax return (Form 706) to elect it, even when no tax is due. Estates that missed the deadline can generally make a late election within five years of death under Revenue Procedure 2022-32.

An illustration: the first spouse dies in 2026 with $3 million in assets and uses none of the exclusion for gifts. Electing portability carries $12 million of unused exclusion to the survivor, who can then pass up to $27 million in 2026 terms free of federal estate tax. If the survivor's estate later grows to $27 million and portability was not elected, $12 million would be exposed to 40% tax, or $4.8 million. The ported amount is not indexed for inflation, which is one reason larger estates sometimes use a credit shelter trust at the first death instead.

State estate and inheritance taxes

Twelve states and Washington, D.C. have their own estate taxes, with 2026 exemptions from $1 million in Oregon and $2 million in Massachusetts up to $15 million in Connecticut. Most do not allow portability. Five states tax inheritances: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania, with Maryland the only state to have both. Rates and exemptions depend on the heir's relationship; Pennsylvania taxes children at 4.5%. Creative Planning keeps a state-by-state summary.

Income tax: the step-up

Assets included in your estate generally receive a new cost basis equal to their value at death, which erases the built-in capital gain. That is why giving highly appreciated assets away during life, instead of leaving them at death, can raise the family's total tax. Our capital gains tax guide covers the step-up in more detail.

Choosing fiduciaries

• Executor and trustee. Choose for organization, reliability, and fairness, not birth order. Naming co-trustees who do not get along stalls decisions. A corporate trustee or professional fiduciary costs money but can help with large or complex trusts, blended families, or long-lasting trusts for young beneficiaries.
• Financial agent under a power of attorney. This person can act while you are alive, so trust matters most. Some people make the power effective only on incapacity, which is safer but slower to use.
• Health care agent. Someone who knows your wishes, is reachable, and will follow them under pressure.
• Guardian for minor children. Consider naming a separate trustee to manage the children's money.

Name backups for every role.

Digital assets and records

Most states have adopted a version of the Revised Uniform Fiduciary Access to Digital Assets Act, which lets you authorize fiduciaries to access online accounts. Use the providers' own tools where they exist, such as Apple's Legacy Contact and Google's Inactive Account Manager, and keep a secure record of accounts, passwords or password manager access, crypto wallet recovery information, and where the original documents are stored. Crypto held in self-custody is lost for good if nobody can find the keys.

Checklist

1. List assets, how each is titled, and who is named as beneficiary.
2. Sign a will, durable power of attorney, and health care directive with HIPAA authorization.
3. Decide, with an attorney licensed in your state, whether a revocable trust is worth it; if so, fund it.
4. Update every beneficiary form and add contingent beneficiaries.
5. Plan for inherited retirement accounts: who receives them, and the tax effect of the 10-year rule.
6. If married, make sure your executor knows to consider a portability election.
7. Record digital assets and where documents are kept, and tell your fiduciaries where to find them.
8. Review the plan after major life events and at least every three to five years.

For charitable bequests, see our philanthropy guide; for owners of private companies, our business succession guide.

This guide is for informational purposes only and does not constitute legal or tax advice. Estate law varies by state and tax figures are as of September 2026. Work with an estate planning attorney licensed in your state and a qualified tax advisor.