The non-grantor trust moves from the estate department to the income tax department

The July 2025 tax law known as the One Big Beautiful Bill Act enlarged the state and local tax deduction, added the qualified business income deduction for pass-through entities and cut capital gains duties on qualified small business stock, and all three changes made non-grantor trusts more useful ^[5]. The consequence is a change of department. A structure long sold on estate tax grounds is now being justified on income tax arithmetic, and according to Frank Paolini, a partner in the private wealth practice at Neal, Gerber & Eisenberg in Chicago, most of his firm's clients are using non-grantor trusts for income tax benefits, with charitable remainder trusts the predominant vehicle ^[13].

The cleanest version of the trade is charitable. Some wealthy donors do not have enough itemized deductions to get the full tax benefit they expect from giving ^[1]. A non-grantor trust is treated as a separate taxpayer ^[2]. Martin Shenkman, a partner at Shenkman Tietz, put the mechanics in one example: take $300,000, put it into a non-grantor trust authorized to give money to charity, and the trust can make the contributions ^[3]. "Trusts don't get a standard deduction, so there's no reduction for that," Shenkman said. "So most of the money that goes to charity can offset the income" ^[4]. Every item on the OBBBA list runs through the same door: separate-taxpayer status is what lets a second return absorb deductions the first one cannot ^[20].

The stock-side version is more aggressive. Kristin Yokomoto, a partner at FBT Gibbons in Newport Beach, California, said clients have asked about toggling off certain grantor trust powers to convert to non-grantor status in order to benefit from qualified small business stock stacking, an action that "requires careful analysis, and timing can matter" ^[11]. She also flagged the distributional point: because she represents high net worth individuals, fewer of her clients will benefit from the SALT cap increase or from permanence of the $15 million exemption, though those changes have likely helped other people ^[12].

Meanwhile the older use case is fading. Jamie Hopkins, CEO of Bryn Mawr Trust Advisors, said estate freeze techniques, which cap taxable asset values by moving them out of the estate so future growth does not raise estate taxes ^[9], are less popular now that OBBBA set the exemption permanently at $15 million for individuals and $30 million for married couples ^[8], twice the individual figure ^[10]. Hopkins said high net worth clients may want non-grantor trusts for either estate or income tax planning, and named Delaware and Nevada as the most advantageous states ^[6][7].

The costs are structural, not fee-based. Non-grantor trusts are irrevocable, said Chris Nason, head of private wealth at Wealth.com and a lecturer in trusts and estates planning at Stanford Law School ^[15]. The grantor cannot easily remove an asset once it is in, unlike a grantor trust ^[19]. Assets held outside the taxable estate do not get a step-up in cost basis when the grantor dies, so current SALT savings on, say, a family property are paid for with a lost basis adjustment later ^[17][18]. And if the grantor's spouse is a beneficiary, the trust is almost always a grantor trust; Nason described spousal lifetime access non-grantor trusts as "weird structures, aggressive structures" and said setting them up means "threading a needle that might not exist" ^[16].

Watch whether awareness catches up to the mechanics. Paolini said many clients are not yet aware of the SALT angle and predicted interest will develop ^[14]. Watch also the toggling question Yokomoto raised, where timing decides whether the small business stock benefit lands at all ^[11].