Financial Planning for High Net Worth Households: 2026 Taxes, Concentrated Stock, State Moves, and Trusts

Most planning advice is written for people saving toward their first million. Past that point the problems change. A household with $1 million to $30 million usually will not owe federal estate tax, since the 2026 exemption is $15 million per person. It can easily pay top federal income tax rates, lose most of its state tax deduction, land in the AMT after exercising stock options, or hold half its net worth in one employer's stock. This guide works through those problems with 2026 figures and worked examples.

Families large enough to run their own investment office should read our family office guide. For wills, revocable trusts, and beneficiary forms, see the estate planning guide.

Thresholds that change the plan

Most of these lines are about income, not net worth. A retired couple with $8 million and $250,000 of income has different problems from two surgeons with $3 million and $1.2 million of income, and the surgeons will usually pay more tax. Accredited status opens private equity, private real estate, and the other options in our alternatives guide; the higher fees and lockups of those funds are covered there.

Income tax is usually the biggest bill

The federal figures below come from Rev. Proc. 2025-32 and the IRS summary of 2026 inflation adjustments, which include the changes from the One Big Beautiful Bill Act.

The SALT cap now shrinks with income

The cap on deducting state and local taxes is $40,400 for 2026 ($20,200 married filing separately). Above $505,000 of modified AGI, the cap drops by 30 cents for every extra dollar of income until it reaches the old $10,000 floor at about $606,333. It rises 1% a year through 2029 and returns to $10,000 in 2030.

Inside that band the phase-down works like a surtax. Each extra $1,000 of income removes $300 of deduction, so a filer in the 35% bracket pays about 45.5% federal tax on that slice. An illustration: a couple with $560,000 of MAGI and $50,000 of state income and property taxes can deduct $23,900 instead of $40,400. If your income sits just above $505,000, larger 401(k) deferrals or moving a bonus or a gain into another year can bring it back under. Well above $606,333, you are at the floor either way.

Owners of partnerships and S corporations have a second route. About three dozen states let the business pay state income tax at the entity level and deduct it federally, an arrangement the IRS accepted in Notice 2020-75. Drafts of the 2025 law would have denied this to law, medical, accounting, and other professional firms; the final law left it alone. The pass-through entity tax helps most when your MAGI is past the phase-down, your state tax exceeds the cap, or you owe AMT, which disallows the SALT deduction entirely. Most states require a fresh election every year, some with deadlines months before the return is due.

Itemized deductions are worth 35 cents at the top

From 2026, once taxable income reaches the 37% bracket, itemized deductions are cut by 2/37 of the smaller of total itemized deductions or income above the bracket line. A couple well into the top bracket with $100,000 of deductions loses $5,405 of them, which makes each deducted dollar worth about 35 cents instead of 37. Charitable gifts also face a new floor: only the portion above 0.5% of AGI counts.

The AMT reaches further

The 2026 AMT exemption is $140,200 for joint filers and $90,100 for singles. It now starts shrinking at $1,000,000 and $500,000 of alternative minimum taxable income, at 50 cents per dollar, and is gone at $1,280,400 and $680,200. In 2025 the joint phaseout did not start until $1,252,700. A couple with $1.1 million of AMT income in 2026 keeps $90,200 of exemption.

The usual triggers are exercising incentive stock options (the spread counts as AMT income), large state tax bills, and interest from private activity municipal bonds. Run the AMT projection before an ISO exercise. AMT paid because of ISOs can often be recovered as a credit in later years.

Investment income tax and state surtaxes

The 3.8% net investment income tax applies above $200,000 of MAGI for singles and $250,000 for couples, thresholds that have never been indexed, so long-term gains cost 23.8% federally at the top. States add layers. Massachusetts charges a 4% surtax on taxable income above $1,107,750 in 2026: a couple with $1.3 million of taxable income owes $7,690 of surtax, and one large capital gain can push an ordinary year over the line. Washington has no wage income tax but taxes long-term capital gains at 7%, plus 2.9% on gains above $1 million.

Asset location and the bond decision

Asset location means holding the least tax-efficient investments in tax-deferred accounts. It helps, but in this wealth range most money sits in taxable accounts because the sheltered space is small. Under IRS Notice 2025-67, 2026 limits are $24,500 of 401(k) deferrals ($32,500 at 50 and up), $72,000 of total annual additions to a defined contribution plan, and $7,500 to an IRA. If your 2025 wages from the employer topped $150,000, catch-up contributions must now go in as Roth.

For many high earners the larger decision is what kind of bonds to hold in the taxable account. An illustration, with yields chosen as round numbers:

On $1 million in the top bracket, the muni pays $34,000 and the taxable bond keeps $26,640 after federal tax, a $7,360 yearly difference. In the 24% bracket the two are even, and the muni's thinner trading market tips it toward the taxable bond. Put another way, a 3.4% muni equals a 5.74% taxable yield at a 40.8% rate. In-state munis also avoid state tax in most states, while Treasuries are exempt from state tax everywhere.

Inside the IRA or 401(k), hold what the tax code treats worst: taxable bonds, REITs, private credit funds, and high-turnover strategies. Broad stock index funds suit the taxable account, where qualified dividends and long-term gains get lower rates, losses can be harvested, and heirs get a step-up in basis. Larger taxable accounts are also where direct indexing starts to earn its fee.

Backdoor and mega backdoor Roth

High earners cannot contribute to a Roth IRA directly, but they can contribute $7,500 to a nondeductible traditional IRA and convert it. The trap is the pro-rata rule, which looks at all your traditional, SEP, and SIMPLE IRA balances on December 31. With $92,500 of pre-tax IRA money and a $7,500 nondeductible contribution, 92.5% of any conversion is taxable, so converting $7,500 creates $6,938 of taxable income. Rolling the pre-tax IRA money into a current employer's 401(k) first, if the plan accepts it, clears the way. The nondeductible basis is tracked on Form 8606.

If your 401(k) accepts after-tax contributions and allows in-plan Roth conversions or in-service withdrawals, you can fill the plan up to the $72,000 limit. An illustration: $72,000 minus $24,500 of deferrals minus a $12,000 employer contribution leaves $35,500 of after-tax room that can end up in Roth.

Concentrated stock

Founders, early employees, and executives often hold one stock worth more than everything else they own. The case for reducing it rests on base rates. Hendrik Bessembinder's study of US stocks from 1926 to 2016 found that about four in seven individual stocks returned less than one-month Treasury bills over their lifetimes, and that the best 4% of companies accounted for all of the market's net wealth creation.

Taxes are what keep people from selling. An illustration: a $2 million position with a $200,000 basis carries a $1.8 million gain. Sold in one year by someone already in the top bracket, the federal tax at 23.8% is $428,400 before state tax. Spreading sales over several years lowers the rate only if part of the gain would fall in the 15% bracket or can be offset by harvested losses. For someone already at the top, spreading mainly limits regret about timing. The capital gains guide covers the brackets. Other ways to reduce a position:

• Give shares instead of cash. Donating stock held more than a year to a public charity or donor-advised fund avoids the gain and generally allows a deduction at market value, up to 30% of AGI. Giving $250,000 of shares with a 10% basis avoids tax on $225,000 of gain, about $53,550 at 23.8%, on top of the deduction. Our philanthropy guide covers donor-advised funds and charitable remainder trusts.
• Exchange funds. You contribute shares to a partnership that pools stock from many investors, and after seven years you can leave with a diversified basket at your original basis. The fund must hold at least 20% in qualifying illiquid assets, usually real estate, the fees continue for the whole period, and most funds admit only qualified purchasers. Section 351 ETF conversions, covered in the direct indexing guide, require that no single stock be more than 25% of what you contribute, so they work only when the concentrated stock is part of a broader portfolio.
• Hedges. A collar (buying a put and selling a call) or a prepaid variable forward limits the downside while you keep the shares. If the hedge removes too much of your risk and upside, Section 1259 treats it as a constructive sale and the gain is taxed anyway, so the terms need a tax adviser's review.
• Planned sales for insiders. Officers and directors can sell under a Rule 10b5-1 trading plan. Since the SEC's 2022 amendments, directors and officers must wait at least 90 days after adopting a plan (up to 120) before the first trade, other employees 30 days, and single-trade plans are limited to one in any 12 months.
• Holding for the step-up. For an older owner with a very low basis, holding until death erases the gain for heirs. A hedge or a loan against the shares can cut the risk while keeping the step-up, at the cost of interest and the chance of a margin call if the stock falls.

QSBS for founders and early investors

Stock in a qualifying C corporation can be partly or fully exempt from federal tax under Section 1202. For stock issued after July 4, 2025, the exclusion is 50% after three years, 75% after four, and 100% after five, capped at the greater of $15 million or 10 times basis per company, and the company can have up to $75 million of gross assets when it issues the stock. The taxable part of a partial exclusion is taxed at 28%. Stock issued earlier keeps the old rules: a five-year hold, a $10 million cap, and a $50 million asset limit. California and a few other states do not follow the exclusion.

Gifts of QSBS to separate non-grantor trusts can multiply the cap, because each taxpayer gets its own limit. Section 643(f) lets the IRS treat trusts with the same grantor and beneficiaries, set up mainly to avoid tax, as one trust, so these need careful drafting. Our venture capital guide covers how startup equity is structured.

Moving to a lower-tax state

Buying a condo in Florida does not end a New York or California tax bill by itself. New York treats you as a resident under two separate tests, and failing either one is enough.

• Domicile. Your domicile stays in New York until you show, by clear and convincing evidence, that you abandoned it and set up a new one. Auditors weigh your homes and how you use them, active business involvement, where you spend your time, where your "near and dear" items are, and where your family lives. The burden of proof is on you.
• Statutory residency. Even with a Florida domicile, you are a New York resident for the year if you keep a permanent place of abode there and spend more than 183 days in the state. Any part of a day counts, including a few hours in a Manhattan office. An apartment you kept plus 184 days means a full year of resident tax on worldwide income.

The state's residency FAQ explains both tests. Auditors routinely ask for phone location data, credit card statements, toll records, and calendars, so a day log kept as you go is much easier to defend than one rebuilt during an audit. After a real move, New York source income, such as pay for work done in the state or gains on New York real estate, stays taxable as a nonresident. California also combines domicile and time tests, and it taxes equity compensation earned while you worked in the state even if you exercise or sell after moving.

A move matters most before a liquidity event, and a large sale soon after a move is exactly what residency auditors look for. Finish the move, and the paper trail, before the sale. Check the destination too. Washington taxes large capital gains and has a 20% top estate tax rate with a $3 million exemption; Florida, Texas, and Nevada have neither an income tax nor an estate tax.

Estate taxes: often a state problem first

The federal exemption is $15 million per person in 2026, $30 million for a married couple who elect portability, indexed for inflation from 2027 with no scheduled sunset. For most households below those amounts, federal estate planning comes down to portability and basis. Assets held until death get a stepped-up basis, so giving away low-basis stock during life can raise the family's total tax.

State estate taxes start much lower: $1 million in Oregon and $2 million in Massachusetts. New York's 2026 exclusion is $7,350,000, with a cliff. Once the taxable estate passes 105% of that amount, or $7,717,500, the exclusion disappears and the whole estate is taxed from the first dollar (see the state's estate tax page and this McDermott summary). Some New York wills send any amount over the exclusion to charity to stay under the cliff.

GRATs at a 5.6% hurdle

For estates above the federal line, or growing toward it, a grantor retained annuity trust moves future appreciation to heirs with little or no taxable gift. You put assets in the trust, take back an annuity for a set term, and whatever remains at the end goes to the beneficiaries. The hurdle is the Section 7520 rate, 5.6% for October 2026 under Rev. Rul. 2026-19. Growth above the rate passes to heirs; growth below it comes back to you.

An illustration: $5 million of stock in a two-year GRAT set up so the taxable gift is close to zero, the approach the Tax Court allowed in Walton v. Commissioner (2000) and that Section 2702 regulations now accept. At 5.6%, the annuity is $2,711,907 a year.

At 15% growth, moving $781,901 out of a taxable estate saves about $312,760 at the 40% rate. If you die during the term, most or all of the assets are pulled back into the estate. A GRAT is also poor for skipping generations, because GST exemption cannot be allocated until the term ends. Families often run short, rolling GRATs for volatile assets and use separate gifts or sales to a dynasty trust for grandchildren; the 2026 GST exemption equals the $15 million estate exemption.

Married couples nearing $30 million also use spousal lifetime access trusts (SLATs), which use one spouse's exemption while the other spouse can still receive distributions. A divorce, or the death of the beneficiary spouse, ends that indirect access. Our trust planning guide covers SLATs, dynasty trusts, and charitable trusts.

Liability and insurance

Visible wealth makes you a better target for lawsuits after a car crash, an injury on your property, or an accident involving a teenage driver. A personal umbrella policy sits above your auto and homeowners liability and is usually sold in $1 million layers, and insurers require minimum limits on the policies underneath. Umbrella policies usually exclude business activities, so a nonprofit or corporate board seat needs directors and officers coverage, and rental properties may need their own liability policies.

Some assets already have protection. Employer plans covered by ERISA are fully protected in bankruptcy. IRAs are protected up to $1,711,975 of combined value for bankruptcy cases filed from April 1, 2025 through March 31, 2028, and money rolled over from employer plans does not count toward that cap. Inherited IRAs are not protected in federal bankruptcy (Clark v. Rameker, 2014). Outside bankruptcy, protection depends on state law. For trusts, LLCs, and titling, see our asset protection guide.

Advisers and what they cost at this level

A 1% asset-based fee on $5 million is $50,000 a year, and the cost compounds. An illustration: $5 million growing 6% a year before fees reaches $16.04 million after 20 years, compared with $13.27 million after a 1% annual fee, a gap of $2.77 million. Many firms cut the percentage above breakpoints, and flat-fee or retainer advisers charge the same amount regardless of assets. The fees guide runs through the comparison.

Fee-only advisers are paid only by clients. Fee-based advisers charge client fees and may also earn commissions on insurance or investment products, a conflict they must disclose. Any registered adviser's Form ADV Part 2A brochure, which lists fees, conflicts, and disciplinary history, is on the SEC's Investment Adviser Public Disclosure site. Our guides on fiduciary duty and choosing an adviser cover the selection process.

The investment adviser is one member of the team. You also need a CPA who projects taxes before year end, an estate attorney licensed in your state, and an insurance broker who handles umbrella and specialty coverage. Many expensive mistakes happen in the gaps between them, such as a revocable trust that was never funded or a Roth conversion done in a year that pushed income into the SALT phase-down.

A yearly review

1. By October, project the year's income against $505,000 (SALT phase-down), $500,000 or $1,000,000 (AMT), and the 37% bracket line, and decide on Roth conversions and gains with those numbers in hand.
2. Confirm the pass-through entity tax election and payment deadlines in each state where your business files.
3. Look at any single stock that has grown into a position you would not buy today, and decide on sales, gifts, or hedges before December.
4. Make charitable gifts in appreciated shares.
5. If you split time between states, reconcile your day log every quarter.
6. Compare umbrella limits with your net worth, and review beneficiary forms and account titling.
7. If a GRAT is part of the plan, watch the monthly 7520 rate, since a lower rate lowers the hurdle.
8. Add up what your advisers cost in dollars.

This guide is for informational purposes only and does not constitute tax, legal, or investment advice. Figures are as of September 2026, and the worked examples are illustrations, not forecasts. Tax, trust, and residency rules vary by state. Work with a CPA, an estate planning attorney licensed in your state, and a fiduciary adviser before acting.