New trust tax targets wealth—but loopholes may let the richest escape
S. 4490 — Fair Trusts for Fiscal Responsibility Act · Filed by Patty Murray (D-WA) · 4 cosponsors · Introduced May 12, 2026 · Referred to committee
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What it does
This bill creates a new annual tax on the net assets held in trusts, with rates ranging from 0% to 3% depending on asset value, starting in 2027. The tax applies to most trusts with U.S. beneficiaries or grantors, but includes credits for taxes already paid and allows beneficiaries to allocate exemption thresholds across multiple trusts. It also treats payments by grantor-trust owners to cover trust income taxes as taxable gifts.
Why we flagged it
The bill's core mechanism is a progressive annual tax on trust assets, but the extensive exemptions (charitable trusts, retirement plans, revocable trusts), valuation discounts, and credit mechanisms suggest it is designed to appear more aggressive than its actual revenue impact may be.
- Section 4 treats payments by grantor-trust owners for trust income taxes as taxable gifts, unrelated to the core asset tax and potentially expanding the gift tax base.
What the text implies
- The 'look-thru rule' for 10-percent interests in other entities may create cascading valuation complexity and opportunities for tax planning through layered entity structures.
- The 'nonbusiness asset' definition and valuation rules (Section 2921) may allow significant discounts for real estate, operating businesses, and working capital, substantially reducing taxable trust assets for wealthy families.
The full analysis lists 5 implications of this text.
Who stands to gain
Estate planning attorneys; Trust and wealth management firms; Family office service providers