For some wealthy clients, charitable giving can come with a frustrating limitation: They may not have enough itemized deductions to get the full tax benefit they expect.
A non-grantor trust can offer a potential solution since these trusts are treated as separate taxpayers.
"If you take, say, $300,000 of money, very small transaction, put it into a non-grantor trust that is authorized to give money to charity, the trust can make charitable contributions," said Martin Shenkman, partner at the estate planning boutique law firm Shenkman Tietz. "Trusts don't get a standard deduction, so there's no reduction for that. So most of the money that goes to charity can offset the income."
The July 2025 tax law, known as the One Big Beautiful Bill Act (OBBBA), enhanced the usefulness of non-grantor trusts because of the larger state and local tax deduction, the qualified business income deduction for pass-through entities and the breaks on capital gains duties from qualified small business stock.
High net worth clients may be interested in non-grantor trusts for estate planning or income tax planning, said Jamie Hopkins, CEO of Bryn Mawr Trust Advisors and chief wealth officer at the Bryn Mawr, Pennsylvania-based Bryn Mawr Trust. Delaware and Nevada are the most advantageous states for these trusts.
Estate freeze techniques, which were more popular before the OBBBA was enacted, are now less popular, since that law made the estate tax exemption permanently $15 million for individuals and $30 million for married couples, Hopkins said. Estate freeze techniques cap taxable values of assets, by moving them out of the estate, so future growth won't raise estate taxes.
Clients have asked about toggling off certain grantor trust powers to change to non-grantor status to benefit from qualified small business stock stacking, said Kristin Yokomoto, Newport Beach, California-based partner at FBT Gibbons who focuses on wealth planning and family office services. This action "requires careful analysis, and timing can matter," she added.
Because she represents high net worth individuals, fewer of them will benefit from the impacts on non-grantor trusts from the SALT cap increase and from the permanence of the increase to $15 million for the federal estate and gift tax exemption, but these changes have likely helped other people, she added.
"Most of our clients are using non-grantor trusts to achieve income tax benefits, and the charitable remainder trusts are predominantly that vehicle, or the purpose of that vehicle, these days," said Frank Paolini, partner in the private wealth practice of Chicago-based law firm Neal, Gerber & Eisenberg. "The SALT tax is something that maybe a lot of our clients are not necessarily aware of yet, and I can predict that there will be some interest in that coming about."
Special cases
Non-grantor trusts are irrevocable, said Chris Nason, head of private wealth at New York City-based estate and tax planning platform Wealth.com and a lecturer of trusts and estates planning at Stanford Law School.
If the grantor's spouse is a beneficiary, it is almost always a grantor trust, but "there are weird structures, aggressive structures, called [spousal lifetime access non-grantor trusts (SLANTs)], where your spouse is a beneficiary, but it still qualifies as a non-grantor trust," he said. "One has to tread very carefully when trying to set those up. You're really threading a needle that might not exist."
Putting real estate in a non-grantor trust
There are pros and cons of putting real estate assets in non-grantor trusts.
"Because it exists outside of the taxable estate of the grantor, the creator of the trust, the assets in that trust won't receive a step up in cost basis when the creator of that trust passes away," Paolini said. "On one hand, you have the current savings of the SALT savings that you would get with having, let's say, a family heirloom piece of property inside this trust, versus the eventual benefits of receiving a cost basis adjustment when the owner, mom or dad, passes away."
Also, in non-grantor trusts, the grantor can't easily remove an asset from the trust, unlike with a grantor trust, he added.
