Rethinking Trust Planning in the Wake of OBBBA
The One Big Beautiful Bill Act (OBBBA) didn’t just tweak charitable deduction rules, it rewrote them. While headlines focused on increased deduction limits and above-the-line opportunities, the repeal of Section 68(e) quietly introduced one of the most consequential shifts in trust-based tax planning: charitable deductions from non-grantor trusts are now subject to a 2/37 haircut.
That means trusts and estates will see roughly 5.4% of their charitable deductions disallowed, starting in 2026. For planners relying on structures like charitable lead trusts (CLTs), testamentary trusts, or non-grantor trusts with charitable intent, this creates tax drag, potential inefficiencies, and a need for immediate reassessment.
From Theory to Tactics
In this in-depth webinar, estate planning authorities Jonathan G. Blattmachr, Alan S. Gassman, and Martin M. Shenkman unpack what the Section 68(e) repeal means in practice, and how it can derail what were once highly effective trust strategies. The panel outlines why the 642(c) deduction, once a powerful tool for charitable planning in non-grantor trusts, may now trigger unexpected income tax obligations and diminish the benefit of charitable lead structures.
The session dives into detailed examples, including how income realization (even via in-kind asset transfers) can now backfire and create "tax-on-tax" consequences, particularly when trust income crosses the modest $15,600 threshold for estates and non-grantor trusts.
Practical Solutions for Complex Problems
For clients no longer itemizing, especially in moderate-wealth categories, non-grantor SLANTs (Spousal Lifetime Access Non-Grantor Trusts) remain a compelling planning tool. These trusts allow families to capture deductions otherwise lost due to the standard deduction, even after accounting for the 2/37 haircut. The speakers explore how pairing these with QCDs or coordinated asset placement can preserve tax value without undermining philanthropic goals.
The panel also explores whether technical corrections or IRS clarification may roll back this provision, and how practitioners should prepare in the meantime.
The Takeaway: Planning Must Evolve
Charitable planning has always been nuanced, but OBBBA introduces an entirely new layer of complexity. As Gassman noted, “It’s not that the deduction is gone, it’s that the math and mechanics have changed.” Estate planners must now adapt not just their structures, but also how they coordinate with CPAs, financial advisors, and charitable gift officers to keep client goals on track.
Watch the full webinar to understand how the repeal of 68(e) is transforming trust taxation and charitable strategy and learn how to build forward-looking plans that protect both wealth and purpose.