By Charlie Case | Winburn, Case, Schrader & Shram, PLLC | April 2026
Imagine a scenario that many families might experience more often than they realize. A couple — let’s call them Chris and Jamie — did all the right things ten years ago. They worked closely with their attorney to set up a revocable living trust, updated their beneficiary designations, and ensured their farm and retirement accounts were all part of a well-coordinated plan. Their attorney reassured them they were in good shape, and indeed, they were — back in 2015.
Fast forward to a plan review today. Within thirty minutes, three places emerge where the law has moved and their plan has not. No one was careless. No one made a mistake. The law simply changed around a plan that was built for a different environment.
This scenario is not unusual. It describes a significant number of Arkansas families who own businesses, farms, or substantial retirement accounts and who did careful, professional planning five or more years ago. 2026 is an especially important year to take a second look — because changes at both the federal level and here in Arkansas have altered the planning landscape in ways that affect even well-designed existing plans.
This post covers three developments worth understanding: new federal rules governing inherited retirement accounts, a fundamental shift in where tax risk now lives for most families, and expanded planning tools now available under Arkansas law. It also addresses the one problem that has nothing to do with new laws and everything to do with whether a plan actually works when it is needed.
If a trust inherits your IRA, the rules just got more complicated
For decades, a common estate planning strategy involved naming a trust — rather than an individual — as the beneficiary of an IRA or other retirement account. The reasons were sound: trusts offer control over how and when funds are distributed, protect assets from a beneficiary’s creditors, and can provide for a spouse or children with specific needs. Under the old rules, a properly structured trust could “stretch” required minimum distributions over the life expectancy of the beneficiary, allowing assets to continue growing tax-deferred for decades.
That strategy was substantially curtailed by the SECURE Act of 2019 and further modified by SECURE 2.0 in 2022. For most non-spouse beneficiaries, inherited retirement accounts must now be fully distributed within ten years of the account owner’s death.
For trusts named as IRA beneficiaries, the practical implications can be significant — and the problems most commonly arise in older trusts that were well-drafted for their time but were not designed for the current rules.
Two issues are worth understanding. First, for a trust to receive any favorable treatment as an IRA beneficiary, it must meet specific requirements that allow the IRS to “look through” the trust to the individual beneficiaries. If a trust includes a charity as a remainder beneficiary, a broad power of appointment, or other provisions that make a non-individual a potential beneficiary, the trust may fail this test entirely — with consequences more severe than the ten-year rule. An IRA with no qualifying designated beneficiary may have to be distributed within five years of the account owner’s death.
Second, even a trust that meets the technical requirements may now produce results the original plan never intended. If the beneficiaries of the trust are adult children or other non-spouse individuals, the ten-year distribution rule applies — and depending on how the trust is written, those distributions may be taxed at trust income tax rates, which reach the top federal bracket at a much lower threshold than individual rates.
The practical message: if a trust is designated as the beneficiary of an IRA, 401(k), or similar retirement account in your current plan — particularly if the trust was drafted before 2020 — you should review that arrangement carefully. Sometimes, changing the beneficiary to individuals directly or to subtrusts created for their benefit can resolve the issue without altering the trust document. In other cases, the trust may need to be updated. The first step is to understand what the trust currently states and whether it still operates as intended under current law.
Most families no longer face estate tax — but a different tax risk has taken its place
For a generation of estate planners and their clients, the federal estate tax was the organizing threat around which most planning strategies were built. Irrevocable trusts, family limited partnerships, grantor retained annuity trusts, and similar tools were designed with one primary goal: moving assets out of the taxable estate before death.
That threat has dramatically diminished. The Tax Cuts and Jobs Act of 2017 roughly doubled the federal estate tax exemption, and the One Big Beautiful Budget Act made it permanent at $15 million per individual — $30 million for a married couple. The vast majority of Arkansas families, including those with substantial farms, businesses, and retirement assets, will not owe federal estate tax under current law.
This is genuinely good news — but it creates a planning problem that many existing estate plans are not designed to handle.
The strategies that removed assets from the taxable estate accomplished their goal, but at a cost: assets transferred into irrevocable structures during life generally do not receive a step-up in basis at death. Under current law, assets that pass through the estate receive a new cost basis equal to fair market value on the date of death — permanently eliminating the embedded capital gain. Assets transferred out of the estate carry their original basis with them.
Consider a straightforward example. A farm purchased in 1985 for $300,000 is now worth $3 million. If it passes through the owner’s estate, heirs receive a $3 million stepped-up basis and owe no capital gains tax on the $2.7 million of appreciation. If it was transferred into an irrevocable trust in 2005 to reduce a then-larger taxable estate, the original $300,000 basis likely carries over — and a future sale could generate a federal and state capital gains tax liability of several hundred thousand dollars.
For families below the exemption threshold, the calculus has shifted. Older irrevocable structures accepted a tradeoff: give up the step-up in basis in exchange for avoiding estate tax. That was a reasonable bargain when estate tax was a real threat. With estate tax off the table for most families, that tradeoff no longer has to be made. A
review can identify whether trust modification, decanting, or other restructuring makes it possible to recapture the step-up in basis — reducing the capital gains tax burden on heirs without any corresponding estate tax cost. For many families, this is a genuine opportunity that did not exist under prior law.
One important caveat: estate tax law changes with the political environment, and planning should account for that possibility. The point is not to abandon irrevocable planning — it is to ensure existing structures are still serving the purpose for which they were designed.
Arkansas quietly expanded its trust laws — and it creates new options for local families
Arkansas has historically not been among the states that estate planners think of first for trust flexibility. States like Nevada, South Dakota, and Delaware developed reputations for sophisticated trust statutes that attracted significant wealth planning activity. In recent years, Arkansas has meaningfully closed that gap.
The most significant addition is the authorization of Domestic Asset Protection Trusts, commonly called DAPTs. Under Act 291 of 2023, Arkansas joined a growing number of states that permit a person to create an irrevocable trust, transfer assets to it, and — if the trust is properly structured — remain a discretionary beneficiary while still obtaining creditor protection for those assets, provided no creditor challenges the transfer within two years. This is a meaningful departure from the traditional rule, under which a person generally could not place assets in a trust for their own benefit and also claim those assets were beyond the reach of creditors.
Arkansas also enacted provisions authorizing trust decanting — the ability of a trustee, under defined circumstances, to distribute assets from an older, less flexible irrevocable trust into a new trust with updated terms. This is a significant tool for modernizing older irrevocable trusts that were drafted before current planning options existed, including trusts that may have problematic provisions under the inherited IRA rules discussed above.
Directed trust statutes now available under Arkansas law allow trust documents to separate investment management from distribution decisions, giving different advisors or family members defined roles within the trust structure. This is particularly useful for business-owning families where the person best positioned to manage a business interest may not be the same person best suited to make distribution decisions for beneficiaries.
Finally, a 2021 change to Arkansas law created a meaningful new option for families concerned about long-term care costs. Act 570 of 2021 amended the Arkansas beneficiary deed statute to remove real property transferred by beneficiary deed from Medicaid estate recovery. A beneficiary deed designates who receives real estate at death without probate, while the owner retains full control during their lifetime. Before 2021, property transferred this way was still subject to Medicaid recovery claims. Under current law, that exposure is eliminated for real property passing through a beneficiary deed — and unlike most other asset protection strategies, a beneficiary deed generally does not trigger the five-year Medicaid lookback period.
This is one tool among several for families thinking about long-term care exposure. Whether it fits a particular situation — and how it interacts with business or farm planning, other assets, and overall estate goals — is exactly the kind of question a plan review is designed to answer.
These tools are not appropriate for every situation, and timing matters enormously — asset protection planning must be done well in advance of any creditor claim or Medicaid application to be effective. But for Arkansas families who previously assumed that the best asset protection structures required moving assets to an out-of-state trust, these changes are worth knowing about.
The most common problem we see has nothing to do with new laws
Every law change discussed above is real and worth addressing. But in plan reviews, the issue that comes up most often has been true for decades and has nothing to do with Congress or the Arkansas legislature: the trust was never properly funded, or it became unfunded over time.
A revocable living trust only controls what is in it — or what is properly coordinated with it through beneficiary designations and account titling. A trust that sits in a drawer while real estate remains titled in individual names, bank accounts remain outside the trust, and retirement account beneficiary designations remain unchanged for 15 years is not doing the work the family paid for.
This is not a criticism of clients or of the attorneys who drafted their plans. Life moves fast. People refinance homes, open new accounts, sell property and buy different property, start businesses and wind them down. Each of those transactions is an opportunity for an asset to fall outside the trust’s reach — and most of the time, no one notices until there is a problem.
A plan review is not only a review of legal documents. It is a systematic check of whether the legal structure and the actual asset titles are still aligned. That means looking at real estate deeds, bank and brokerage account titling, retirement account and life insurance beneficiary designations, and business ownership records. For farm families, it means verifying that the operating entity, the land, and any equipment or machinery are all positioned consistently with the succession plan.
The good news is that this category of problem is almost always fixable — often with relatively straightforward document work — once it is identified.
What this means for your plan
Not every estate plan needs to change because of the developments described here. Some plans were drafted broadly enough to function well under current law. Some families have had reviews recently and already addressed these issues. The point is not that everyone is in trouble — it is that 2026 is an unusually good year to check.
The families most likely to benefit from a review are those whose plans are five or more years old, those who own a business, farm, or professional practice, those with significant retirement accounts or real estate that has appreciated substantially, and those whose plans name a trust as a beneficiary of any retirement account.
If any of those descriptions fit your situation, a conversation costs very little and can provide genuine peace of mind — or identify something worth addressing before it becomes a problem.
If your estate plan is more than three to five years old — or if it includes a trust named as beneficiary of a retirement account, assets in an irrevocable structure, or a farm or business you intend to pass to the next generation — it may be worth a conversation.
Call our office at 501-975-6266 or Contact Us to schedule a review.
Charlie Case is a partner at Winburn, Case, Schrader & Shram, PLLC, where he focuses on estate planning, business succession, and elder law for Arkansas families.
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This post is intended for general informational purposes only and does not constitute legal advice. Reading this post does not create an attorney-client relationship between you and Winburn, Case, Schrader & Shram, PLLC. Every situation is different, and the law as it applies to your specific circumstances may differ from what is described here. If you have questions about your estate plan or any legal matter, we encourage you to consult with a qualified attorney.