Last week, one of my clients forwarded me a CNBC article with a simple question:

“Does this affect our trust?”

It’s a fair question—and one I’ve been hearing more often from families across Southern Utah.

The article discussed a little-known provision tucked inside the recently passed One Big Beautiful Bill Act, a tax law that includes some significant estate planning changes. While most of the headlines focused on the increased federal estate tax exemption, tax attorneys and accountants quickly discovered another provision that could impact many existing trusts.

For some Utah families, the answer is yes—it could matter.

Here’s what we know today, what remains uncertain, and what trust owners should be doing now.

The Good News: Higher Estate Tax Exemptions

The biggest headline from the new tax law is the permanent increase in the federal estate tax exemption.

Beginning in 2026:

• Individuals can pass up to $15 million free of federal estate tax.
• Married couples can protect up to $30 million.
• Unlike previous laws, these exemption amounts currently have no scheduled sunset.

For families with substantial estates, this is excellent news.

But while nearly every news outlet covered this change, another provision received very little attention—and it may affect far more families than the estate tax exemption ever will.

The Hidden Tax Rule Affecting Family Trusts

Buried inside the Joint Committee on Taxation’s explanation of the new law is language suggesting that a new deduction limitation may now apply to trusts and estates.

That matters because trusts reach the highest federal income tax bracket much sooner than individuals.

For 2026:

• A trust reaches the 37% tax bracket at roughly $16,000 of taxable income.
• An individual doesn’t reach that same bracket until earning more than $640,000.

That’s an enormous difference.

Many trusts created by everyday families—not just wealthy households—could now be affected.

Why Some Trusts May Face Double Taxation

Traditionally, trusts that distribute income to beneficiaries receive a deduction for those distributions.

The beneficiary reports the income and pays the tax.

In other words, the income is generally taxed once.

Under the new interpretation of the law, that deduction may be limited.

If that happens, the trust could owe taxes on income it already distributed while the beneficiary also pays taxes on the same money.

That’s where concerns about double taxation come from.

For example, imagine a trust that distributes income to a surviving spouse exactly as it was designed to do.

If the trust cannot fully deduct that distribution:

• the surviving spouse pays taxes on the income received, and
• the trust may also owe taxes on part of that same income.

To cover that unexpected tax bill, the trustee may have to:

• use trust principal,
• reduce future distributions, or
• seek court approval to modify how the trust operates.

None of those outcomes are what most families intended when they created their trust.

Which Utah Families Could Be Affected?

This isn’t just an issue for ultra-wealthy families.

Many estate planning professionals believe this change could impact trusts created for practical family purposes, including:

Special Needs Trusts

Families who have established a trust for a child or loved one with disabilities may be affected if that trust distributes taxable income while preserving government benefits.

Trusts for a Surviving Spouse

Many married couples create trusts that provide income for a surviving spouse while preserving assets for children.

These trusts may now face additional tax consequences depending on how income distributions are handled.

Irrevocable Life Insurance Trusts

Some irrevocable trusts that own life insurance or other income-producing assets could also fall under these new rules if they generate taxable income.

The common factor isn’t the size of the estate.

It’s whether the trust distributes taxable income to someone who depends on those distributions.

What We Still Don’t Know

It’s important to understand that this concern comes from Congress’s official explanation of the law—not directly from the statutory language itself.

The U.S. Treasury Department is expected to issue additional guidance explaining how these rules should be interpreted.

That guidance could:

• narrow the impact,
• clarify which trusts are affected,
• resolve the double taxation concern entirely, or
• confirm that the limitation applies broadly.

Until then, estate planning attorneys and tax professionals are closely monitoring developments.

As one tax attorney told CNBC:

“Hope for the best, but plan for the worst.”

That’s good advice.

What Southern Utah Families Should Do Now

If you have a trust, now is an excellent time to review it.

That doesn’t necessarily mean anything needs to change.

But it does mean you should understand:

• what type of trust you have,
• how it generates income,
• who receives distributions,
• and whether the new tax law could affect how your trust operates.

Some trusts have flexibility.

Others may benefit from adjustments before year-end if Treasury guidance confirms these concerns.

Every family’s situation is different.

Estate Planning Isn’t “Set It and Forget It”

Many people believe estate planning ends once the documents are signed.

In reality, a trust should evolve as laws—and your life—change.

Tax laws change.

Families grow.

Children become adults.

Businesses expand.

Assets change.

An estate plan should keep up.

That’s why we regularly review estate plans for families throughout St. George, Washington, Hurricane, Santa Clara, Ivins, Cedar City, and communities across Southern Utah.

Sometimes everything still works perfectly.

Sometimes a simple update can prevent much bigger problems later.

Schedule a Trust Review Before the End of the Year

If your trust hasn’t been reviewed since the passage of the new federal tax law, now is a good time to take another look.

During a complimentary Life & Legacy Planning® Session, we’ll review:

• your trust,
• your current assets,
• your family goals,
• and whether recent tax law changes could impact your plan.

Our goal isn’t to create unnecessary changes.

It’s to make sure your trust is still doing exactly what you created it to do—protect the people you love.

If you’re in St. George or anywhere in Southern Utah, we’d be happy to help you review your plan and answer your questions before these tax changes begin affecting trusts in 2026.