For years, January 1, 2026, was circled on every estate planner’s calendar. 

The “sunset” of the 2017 Tax Cuts and Jobs Act (TCJA) threatened to cut the federal estate exemption roughly in half. Advisors were operating in a use-it-or-lose-it environment, accelerating gifting strategies and preparing clients for a potential tax cliff. 

Now, the landscape looks different. 

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, altered the sunset path. The OBBBA raises the estate exemption to $15M for individuals and $30M for couples, indexed for inflation starting in 2027. The conversation has shifted as we are no longer simply racing a deadline. 

Instead, we are entering a new planning phase that requires precision. 

For high-net-worth families, the question is no longer just “How much exemption do we use before it disappears?” 

Instead, it’s “How do we optimize in a system that may preserve high exemptions but introduce new friction elsewhere?” 

And that’s where charitable planning becomes far more strategic. 

Estate Exemptions: Stability Changes the Tone 

With estate exemptions now permanent, the urgency around accelerated lifetime gifting has eased.  

The Opportunity: 
Without immediate sunset pressure, advisors can focus on more thoughtful, long-term wealth transfer strategies instead of rushed transactions. 

The Reality: 
Even in a high-exemption environment, estate tax is still relevant for ultra-high-net-worth families. And more importantly, income tax planning has become more complex. 

We are moving from “estate compression panic” to “income tax optimization discipline,” and that distinction matters. 

Charitable Giving: The New Friction Advisors Must Understand 

While estate exemption levels may feel more stable, charitable deduction mechanics have become more nuanced. 

The OBBBA introduced two provisions that directly affect high-income itemizers: 

• A 0.5% AGI floor for charitable deductions 
• A 35% cap on the value of charitable tax benefits for taxpayers in the 37% bracket 

These mechanisms create subtle but meaningful “tax drag.”  

What does the 0.5% AGI floor mean for high-income donors? 

For example, a client with a $2M AGI, even a 0.5% floor makes the first $10,000 of charitable giving economically inefficient from a deduction standpoint. And a client in the 37% bracket now faces a hard 35% cap on the benefit value of their charitable deduction, meaning the top marginal rate no longer applies to large gifts. 

This does not eliminate charitable planning—it changes how we structure it. 

The Big Strategic Question I’m Getting Most Often:  
Can a Trust Fund a Donor-Advised Fund? 

Yes. 

In this environment, that flexibility is even more powerful. 

Trust-to-DAF structures allow charitable planning to move from check writing to structural architecture. 

When does a CRT outperform a direct DAF contribution? 

When a client holds a highly appreciated asset and needs income from it, a Charitable Remainder Trust paired with a DAF as the remainder beneficiary can outperform a direct contribution. The CRT sells the asset tax-free, generates an income stream for the client, and passes the remainder to the DAF at termination. This preserves grantmaking flexibility across generations. Under the OBBBA’s 0.5% floor and 35% cap, the CRT’s deduction profile, which is calculated on the present value of the remainder interest rather than the full asset value, can also be more efficient in the contribution year than a single large direct gift. 

For example: 

• A revocable trust can direct assets to a DAF at death. 
• An irrevocable trust can name a DAF as a remainder beneficiary. 
• A Charitable Lead Trust (CLT) can distribute annual lead payments to a DAF instead of directly to operating charities. 

While often overlooked, that last structure is where things become particularly strategic. 

The “Lead-to-DAF” Strategy 

The steps for distributing annual lead payments to a DAF are as follows: 

1. Fund the CLT: The client transfers assets into a non-grantor Charitable Lead Trust. 

2. Make Annual Lead Payments to a DAF: The trust pays its required annual annuity or unitrust amount to a DAF for a set term of years. 

3. See the Result: The present value of the charitable lead interest reduces the taxable gift of the remainder passing to heirs, and in certain interest rate environments, can significantly reduce or nearly eliminate the taxable gift. 

Because the DAF receives the lead payments, the family retains advisory privileges over how funds are ultimately granted to operating charities which create a flexible, family-directed philanthropic vehicle without the administrative complexity of a private foundation. 

Expert Insight 

In the current legislative environment, a non-grantor CLT may provide additional planning leverage because the trust’s charitable deduction under IRC §642(c) is taken at the trust level. 

An important nuance: the deduction belongs to the trust, not the grantor. The non-grantor trust is its own taxpayer. Any net income earned above what is distributed to charity is taxable to the trust, and the charitable deduction offsets that trust-level income—not the individual’s AGI. As a result, it is not subject to the 0.5% AGI floor applicable to individual taxpayers. 

This distinction is subtle, but it is where sophisticated charitable and estate planning intersect. 

The Real 2026 Shift: From Simple Giving to Engineered Giving 

For years, many high-income clients simply wrote checks. 

In a world with new deduction floors and benefit caps, that approach becomes incrementally less efficient. 

The advisors who will add disproportionate value in 2026 and beyond are those who: 

• Re-evaluate “bunching” strategies—not just to clear the standard deduction, but to clear potential AGI floors. 
• Review trust documents to ensure flexibility in naming DAFs or other charitable vehicles. 
• Analyze high-income years (e.g., business exits, liquidity events) for advanced charitable integration. 
• Consider tools like Qualified Charitable Distributions (QCDs), which bypass AGI calculations entirely. 

We are no longer in a “set it and forget it” charitable environment. We are in a design environment. 

What This Means for Advisors 

The policy environment didn’t simplify planning. It made integration more important. 

Estate planning. 
Income tax planning. 
Trust architecture. 
Charitable strategy. 

These are not separate conversations anymore—they are one coordinated discussion. 

And charitable vehicles, particularly donor-advised funds, are increasingly central to that architecture. 

The cliff may be gone, but the calculus has evolved. 

Our role is not to react to headlines. 
It’s to engineer clarity within whatever framework Congress leaves us. 

That’s where real value lives. 

Frequently Asked Questions 

Does the OBBBA eliminate charitable deductions? 

No. The OBBBA preserves the charitable deduction but adds two new constraints for high-income itemizers: a 0.5% AGI floor and a 35% cap for taxpayers in the 37% bracket. Deductions that exceed the cap in a single year carry forward for up to five years. The deduction is not gone, it requires more precision to optimize. 

Is a donor-advised fund still worth using after the OBBBA? 

Yes, and the case for bunching into a DAF is stronger than before. Because the standard deduction remains high and the new AGI floor adds another threshold to clear, contributing several years of charitable gifts into a DAF in a single high-income year is one of the most efficient ways to capture the full deduction. The DAF lets clients take the tax benefit now and make charitable decisions over time. 

How does a Charitable Lead Trust interact with a donor-advised fund? 

A Charitable Lead Trust can direct its annual lead payments to a donor-advised fund rather than paying operating charities directly. This structure, sometimes called a Lead-to-DAF, reduces the taxable gift of the remainder passing to heirs while giving the family advisory control over how the charitable dollars are ultimately granted. It combines transfer tax efficiency with philanthropic flexibility, without the administrative complexity of a private foundation. 

What is the difference between a grantor and non-grantor Charitable Lead Trust? 

In a grantor CLT, the grantor takes the charitable deduction personally in the year of funding but must include the trust’s income on their own tax return each year. In a non-grantor CLT, the trust is a separate taxpayer, the charitable deduction under IRC §642(c) belongs to the trust and offsets trust-level income, not the grantor’s AGI. As a result, the non-grantor structure is not subject to the new 0.5% AGI floor applicable to individual taxpayers, which makes it a more efficient vehicle in certain high-income planning scenarios.