This article is for informational purposes only and is not intended as investment advice, an offer, or a recommendation to invest in any security. All investments carry risks, including the potential loss of principal.
For families with substantial wealth, the central estate-planning question is rarely whether there is enough to pass on. It is how much survives the transfer. Between federal estate tax, generation-skipping transfer tax, state-level death taxes, and the friction of moving illiquid assets, a multi-generational estate can lose a meaningful share of its value in the handoff if the structure is not built deliberately and well in advance.
The 2026 Exemption Landscape: A Higher Floor, Not a Permanent One
The starting point for any high-net-worth estate plan is the federal estate and gift tax exemption. Under the One Big Beautiful Bill Act signed in July 2025, the exemption was set at $15 million per individual and $30 million per married couple beginning in 2026, indexed for inflation going forward. This replaced the prior schedule, under which the elevated exemption was due to sunset at the end of 2025 and revert to roughly half that level.
In our view, the most important word in that paragraph is “current.” Exemption levels are a function of legislation, and legislation changes. The exemption was roughly $5.5 million per person in 2017, jumped to over $11 million in 2018, and has been a moving target ever since. A family that builds an estate plan assuming today’s $15 million figure is permanent is building on a floor that Congress has historically moved with some regularity. Plans designed to flex with the exemption — rather than to a single fixed number — tend to age better.
Above the exemption, the federal estate tax rate reaches 40%. Layered on top of that, the generation-skipping transfer (GST) tax applies a separate 40% levy on transfers that skip a generation — for example, from grandparent directly to grandchild — designed specifically to prevent wealthy families from avoiding a layer of estate tax. For families thinking in terms of dynasties rather than single handoffs, the GST exemption is as consequential as the estate exemption itself, and the two must be coordinated.
Core Structures High-Net-Worth Families Tend to Use
There is no single instrument that solves estate planning. What tends to work is a coordinated set of structures, each addressing a different objective — removing appreciation from the taxable estate, controlling the timing and conditions of distributions, and preserving liquidity to pay whatever tax remains. The tools below are among the most commonly used; which combination fits depends entirely on a family’s assets, goals, and state of residence, and should be designed with qualified legal and tax counsel.
Irrevocable and Grantor Trusts
An irrevocable trust removes assets — and critically, their future appreciation — from the taxable estate. A grantor-retained version, such as an intentionally defective grantor trust (IDGT), can be especially powerful for high-growth holdings: the grantor pays the income tax on trust assets personally, which is effectively an additional tax-free gift to beneficiaries, while the assets compound outside the estate. For a family holding rapidly appreciating private-company shares, freezing today’s value into a trust before a liquidity event can move enormous future gains out of the estate entirely.
Dynasty Trusts and GST Planning
A dynasty trust is designed to hold wealth across multiple generations while using the GST exemption to shield those transfers from the generation-skipping tax. In states that have repealed the rule against perpetuities — such as Delaware, South Dakota, and Nevada — these trusts can theoretically last for centuries. For families whose planning horizon extends beyond their children to grandchildren and beyond, allocating GST exemption efficiently is often where the largest long-term tax savings are found.
Annual Gifting and Valuation Discounts
The annual gift tax exclusion — $19,000 per recipient in 2025, rising to $19,000+ as indexed — allows wealth to move out of an estate steadily without consuming the lifetime exemption. For closely held business interests and certain private-fund positions, valuation discounts for lack of marketability and lack of control may further reduce the taxable value of gifted assets, though these are an area of active IRS scrutiny and require careful, defensible appraisal.
The Illiquid Asset Problem
Most estate-planning guidance assumes a portfolio of publicly traded securities that can be valued daily and sold in minutes. High-net-worth estates rarely look like that. They hold operating businesses, real estate, private-fund interests, and increasingly, pre-IPO equity in private companies. These assets create two specific problems that a generic estate plan does not address.
The first is valuation. A privately held company or a stake in a venture fund does not have a closing price. Establishing a defensible fair-market value for estate and gift tax purposes requires qualified appraisal, and an aggressive or poorly documented valuation invites IRS challenge years later, when records are cold and the appraiser may no longer be available. Families holding private positions should be establishing and documenting valuations contemporaneously, not reconstructing them after a death.
The second is liquidity. Federal estate tax is generally due within nine months of death — in cash. An estate that is asset-rich but cash-poor can be forced to sell illiquid holdings at a discount, or in a distressed timeframe, simply to meet the tax bill. This is precisely the scenario that pre-IPO and private secondary positions can complicate: a family may hold substantial paper wealth in a company that has not yet gone public, with no straightforward way to convert it to cash on the IRS’s timeline. Planning for this in advance — through life insurance held in an irrevocable trust, structured liquidity reserves, or a deliberate secondary-sale strategy — is often the difference between an orderly transfer and a forced one.
Where Investment Strategy Meets the Estate Plan
The structures above are legal instruments, but they are only as good as the assets inside them and the liquidity planning around them. This is where investment strategy and estate planning have to be coordinated rather than run on separate tracks. A few principles tend to hold for high-net-worth families.
Asset location matters. Highly appreciating assets — private equity, venture positions, founder stock — are often the best candidates to move into grantor or dynasty trusts early, because the entire future gain compounds outside the estate. Income-producing assets that the family needs for cash flow may be better retained. The sequencing of which assets go where, and when, can materially change the eventual tax outcome.
Liquidity should be engineered, not assumed. For families with concentrated private holdings, building a deliberate liquidity plan — whether through insurance, a reserve allocation, or a phased secondary-sale program — protects the estate from being forced to transact at the worst possible moment. At TSG Invest, much of our work with accredited families centers on exactly this intersection: holding private and pre-IPO exposure with intention, while maintaining a clear view of how and when those positions could be converted to liquidity if an estate needs it.
Timing around liquidity events is decisive. The window before an IPO, acquisition, or major up-round is frequently the single best opportunity to freeze a low valuation into a trust before the appreciation occurs. Once the event happens, the gain is already in the estate. Families holding private positions that may experience a near-term liquidity event should be having the estate-planning conversation before the event, not after.
Frequently Asked Questions
What is the federal estate tax exemption in 2026?
As of 2026, the federal estate and gift tax exemption is $15 million per individual and $30 million per married couple, indexed for inflation, following the One Big Beautiful Bill Act of 2025. Amounts above the exemption are generally taxed at a top federal rate of 40%. Exemption levels are set by legislation and have changed several times in recent years, so plans should be designed to adapt.
Do I need estate planning if my estate is below the exemption?
Possibly, yes. Even estates below the federal exemption may face state-level estate or inheritance taxes — several states impose their own death taxes at much lower thresholds. Estate planning also governs how and when assets pass, who controls them, and how illiquid holdings are valued and transferred, all of which matter regardless of federal tax exposure.
How do private or pre-IPO holdings complicate estate planning?
Illiquid assets such as private-company shares and venture-fund interests are difficult to value for tax purposes and cannot be quickly converted to cash to pay an estate tax bill that is generally due within nine months of death. Families holding these positions may need to establish contemporaneous valuations and a deliberate liquidity plan to avoid a forced sale at a discount.
What is a dynasty trust?
A dynasty trust is an irrevocable trust designed to hold and grow wealth across multiple generations while using the generation-skipping transfer tax exemption to shield those transfers from an additional layer of tax. In states that allow perpetual trusts, such a structure can theoretically last indefinitely.
Planning Across Generations
Estate planning for high-net-worth families is not a single document signed once. It is an ongoing coordination between legal structure, tax strategy, and investment management that should be revisited as exemptions change, assets appreciate, and liquidity events approach. The families who preserve the most wealth across generations are generally those who started early, documented carefully, and treated their illiquid holdings as a planning priority rather than an afterthought. At TSG Invest, we work alongside our clients’ estate attorneys and tax advisors on the investment dimension of that work — helping accredited families hold private and pre-IPO exposure with a clear view of valuation, liquidity, and timing. The goal is straightforward: that more of what a family builds actually reaches the next generation.
TSG Invest is a multi-entity financial services firm offering private wealth management, alternative investment access, and institutional-grade portfolio strategies for accredited investors. Securities offered through TSG Capital Advisors LLC. Advisory services offered through TSG Alpha Partners LLC, an SEC-registered investment adviser.
This content is for informational purposes only and does not constitute investment advice. All investing involves risk, including the potential loss of principal. Past performance does not guarantee future results. Forward-looking statements are subject to market conditions and may not materialize.
TSG Invest is a multi-entity financial services firm offering private wealth management, alternative investment access, and institutional-grade portfolio strategies for accredited investors. Securities offered through TSG Capital Advisors LLC. Advisory services offered through TSG Alpha Partners LLC, an SEC-registered investment adviser.
This content is for informational purposes only and does not constitute investment advice. All investing involves risk, including the potential loss of principal. Past performance does not guarantee future results.