Official Inflation Adjustments for 2026

Posted on by October 10, 2025

The Internal Revenue Service has released Rev. Proc. 2025-32, 2025-44 I.R.B. ____ (10/27/2025), with inflation adjustments for 2026 (sooner that inflation adjustments are usually published), and the significant federal estate tax and trust planning numbers previously published were correct. Those numbers are as follows:

  • The annual gift tax exclusion will remain at $19,000 (same as for 2025).
  • The annual gift tax exclusion for a non-citizen spouse will be $194,000 (had been $190,000 for 2025).
  • The “2 percent” amount for purposes of section 6166 will be $1,940,000 (was $1,900,000).
  • The limitation on the special use valuation reduction under section 2032A will be $1,460,000 (was $1,420,000).
  • The top (37%) income tax bracket for estates and trusts will begin at $16,000 (was $15,650).
  • The alternative minimum tax exemption for estates and trusts will be $31,400 (was $30,700), and the phaseout of the exemption will start at $104,800 (was $102,450).

Not included in the above list is the federal estate tax base applicable exclusion amount (and generation-skipping tax exemption), because it was changed to $15,000,000 for deaths and gifts in 2026 by section 70106 of P.L. 119-21 (the “megabill” formerly known as the “One Big Beautiful Bill”). It had been $13,990,000 for 2025, and will not be adjusted for inflation until 2027.

Residential Real Estate Reporting Delayed

Posted on by October 1, 2025

The Financial Crimes Enforcement Network (“FinCEN”) has issued an “exemptive relief order” delaying the effective date of the residential real estate transaction reporting regulations (31 C.F.R. § 1031.320 et seq.) to March 1, 2026. “Exemptive Relief Order to Delay the Effective Date of the Residential Real Estate Rule” (9/30/2025), ___ F.R. ___ (______).

No Inheritance Tax Deduction for Indemnifications to Trustees

Posted on by September 29, 2025

The trustees of a trust for the lifetime benefit of the decedent made discretionary distributions to the decedent for which the decedent signed agreements indemnifying the trustees. Following the death of the decedent, the remainder beneficiaries sued the trustees, and the decedent’s estate assumed the costs of defending the trustees. The Orphans’ Court had held that the settlement payments by the estate to the trust remaindermen were not deductible debts of the estate under section 2129(b) of the Inheritance and Estate Tax Act (72 P.S. § 7129(b)) because one of the trustees who was indemnified was also the counsel to the decedent and had a confidential relationship with the decedent, resulting in multiple conflicts of interest (e.g., that trustee signed some of the agreements both as agent for the decedent and as an indemnified trustee), and so the indemnification agreements were not “bona fide” agreements. The Commonwealth Court held that the estate had the burden of showing that the indemnification agreements were “fair under the circumstances and beyond the reach of suspicion” and failed to make that showing. It was also not an error or abuse of discretion by the Orphans’ Court to conclude that the trust litigation expenses were not deductible by the estate because the litigation did not involve the estate and did not benefit the estate even though the court had approved the payment of the expenses from the estate. Estate of Richard M. Scaife v. Commonwealth, ___ A.4th ___, 88 CD 2024 (Pa. Cmwlth. 9/23/2025), aff’g in part, 2 Fid.Rep.4th 61 (Westmoreland O.C. 2023).

Heir Disinherited by Earlier Will Had Standing to Appeal Probate of Later Will When There Was “Realistic Probability” of Invalidating Earlier Will

Posted on by September 28, 2025

An intestate heir has standing to challenge the validity of a will that has been admitted to probate if in his petition he alleges a “realistic probability” that a will that was executed one year before and that also disinherits him is also invalid, so that he would receive an intestate share of the estate if both wills were invalid. This is true even though the court has no jurisdiction to determine the validity of the earlier will, and only the validity of the will that was admitted to probate would be adjudicated in the current proceedings. The allegations that the decedent exhibited signs of dementia and was wholly dependent” on the principal beneficiary of the contested will were sufficient allegations of a confidential relationship for purposes of undue influence. Finally, the proponent of the will would receive 60% of the estate, and not an intestate share of one third, so there was a showing of “substantial benefit” for purposes of undue influence even though the proponent would receive a similar share of the estate under the earlier will (for which the contestant alleged a “realistic probability” of invalidity). In re: Estate of Vicent J. Morante, Sr., 2025 PA Super 176, ___ A.4th ___ (8/14/2025).

New Financial Reporting for Residential Real Estate Transactions

Posted on by October 1, 2025

In 2024, the Financial Crimes Enforcement Network (“FinCEN”) published final regulations, to be effective December 1, 2025, requiring financial reporting for non-financed residential real estate transactions. “Anti-Money Laundering Regulations for Residential Real Estate Transfers,” 84 F.R. 70258 (9/29/2024), adopting 31…

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Proposed Amendments to O.C. Rules on Termination of Parental Rights

Posted on by September 19, 2025

The Orphans’ Court Procedural Rules Committee has proposed a number of amendments to rules relating to hearing notices in proceedings for the termination of parental rights. “Proposed Amendment of Rules 4.5, 4.6, 15.4, 15.7, 15.8, 15.9, 15.10, and 15.13 and Adoption of Form A-13 of the Pennsylvania Rules of Orphans’ Court Procedure,” 55 Pa.B. 6684 (9/20/2025).

Updated Online EIN Application

Posted on by September 15, 2025

On Aug. 18, 2025, the Internal Revenue Service updated the employer identification number (EIN) online application, which the IRS reported was part of ongoing modernization efforts, and should be easier to use.

A past source of confusion was that the online application treated the “responsible party” of a trust as the grantor (or owner or “trustor”) of the trust, even though the grantor of a trust usually has no role in the administration of an irrevocable trust, and may even be dead. This treatment was consistent with the instructions to the printed application, Form SS-4, and those instructions have not (yet) changed, but some practitioners have reported that the new online application treats the “responsible party” as the trustee and not the grantor, which is more consistent with the law of trusts.

New Form 706 for 2025

Posted on by September 14, 2025

The Internal Revenue Service has released a new Form 706, “United States Estate (and Generation-Skipping Transfer) Tax Return,” for decedents dying after 2024.

The new form is 5 pages (previous version was 4 pages), but with all the schedules (the new versions of which can be found on the Forms and Publications page), the new Form 706 is 56 pages, and there are numerous changes to the layout of the form.

Will Forgery Proven by Handwriting Expert Despite Testimony of Subscribing Witness

Posted on by September 14, 2025

It was not an error of law or abuse of discretion for the Orphans’ Court to find that there was clear and convincing evidence that the probated will was a forgery based on the testimony of a handwriting expert and other witnesses familiar with the decedent and his signature, and contrary to the testimony of another expert, as well as a witness who claimed to have witnessed the execution of the will. In re: Estate of Carlos Ignacio Sanchez, 66 EDA 2025 (Pa. Super. 9/12/2025) (non-precedential).

No Error in Removing Administrator Who Failed to Timely Distribute Estate

Posted on by September 14, 2025

It was not an error of law or abuse of discretion for the Orphans’ Court to remove an administrator when the administration of the estate was substantially completed when the administrator was granted letters due to the death of the executor, and the administrator took no action to conclude the administration of the estate in the two years following her appointment. It was also not error for the court to direct the person who had filed the petition for removal to file a petition for appointment as successor administrator, and to enter an order directing the administrator being removed to turn over estate records and assets to the successor administrator after appointment. In re: Estate of Robert V. Lorent, 2630 EDA 2024 (Pa. Super. 9/11/2025) (non-precedential).