Wealth Management Update

• Published date: 09 December 2025
• Law Firm: Proskauer Rose LLP
• Author: Mr Albert Gortz, Dara Howard, Rachel J. Harris, Caroline Robbins, Nathaniel Birdsall, Stephanie Heilborn, Christiana Lazo, Henry Leibowitz, Jay Waxenberg and Clara D. Leonard

The December 2025 Section 7520 rate for use with estate planning techniques such as CRTs, CLTs, QPRTs and GRATs is 4.6%, the same as in November. The December applicable federal rate ("AFR") for use with a sale to a defective grantor trust or intra-family loan with a note having a duration of:

• 3 years or less (the short-term rate, compounded annually) is 3.66%, down from 3.69% in November;
• 3 to 9 years (the mid-term rate, compounded annually) is 3.79% down from 3.83% in November; and
• 9 years or more (the long-term rate, compounded annually) is 4.55%, down from 4.62% in November.

Inflation Adjustments for 2026¹

On October 9, 2025, the IRS released tax inflation adjustments for 2026, including as follows:

2026	2025	Increase
Lifetime Federal Estate/Gift Tax Exemption2	$15,000,000	$13,990,000	$1,010,000
Annual Exclusion Gifts	$19,000	$19,000	N/A
Beginning of Highest Income Tax Bracket for Trusts & Estates	$16,000	$15,650	$350
Annual Exclusion for Gifts to non-Citizen Spouse	$194,000	$190,000	$4,000

IRS Draft Publication 590-A (2025): Trump Account Update

Per IRS Draft Publication 590-A, parents of children born after 2024 and before 2029 who wish to take advantage of the $1,000 government contribution into a Trump account will have to make two elections on a new Form 4547: one to establish the account, and another to elect to receive the $1,000. This is still draft guidance, so the specifics of implementation may change.

SECURE 2.0 Act - Final Regulations Issued for Roth Catch-Up Contributions

As background, employers may permit employees aged 50 or older to make additional contributions to their employer-sponsored retirement plans. In addition, as of January 1, 2025, employers may allow those aged 60 to 63 an increased catch-up amount of 150% of the otherwise applicable catch-up limit. In 2025, the catch-up contribution amount is an additional $7,500 (on top of the $23,500 contribution limit), and the increased catch-up limit for those aged 60-63 is an additional $11,250 (over the $23,500 limit). Under prior law, catch-up contributions could be made on either a pre-tax or post-tax basis. However, the SECURE 2.0 Act requires that those earning more than $145,000 (indexed for inflation) designate catch-up contributions as Roth contributions. IRS Notice 2023-62 delayed this requirement by two years, until January 1, 2026.

On September 16, 2025, the IRS and Department of Treasury issued final regulations implementing the Roth catch-up contribution requirement.³ Though the regulations generally apply with respect to contributions in taxable years beginning after December 31, 2026, "reasonable, good faith" compliance is generally required beginning January 1, 2026.

The regulations clarify that in determining whether someone meets the $145,000 threshold, only the prior year FICA wages reported in box 3 of Form W-2 are considered. If an eligible participant does not have any wages for purposes of FICA (e.g., because the individual was a partner or other self-employed individual receiving self-employment income, or because the individual is an employee of an exempt state or local government), then they are not subject to the Roth catch-up contribution requirement.

Retirement plans are not required to offer Roth contributions, and, in that case, employees who meet the Roth catch-up contribution threshold will not be able to make catch-up contributions.

It should be noted that special rules apply to 403(b), SIMPLE and governmental 457(b) plans.

Department of the Treasury, Exemptive Relief Order to Delay the Effective Date of the Residential Real Estate Rule (issued September 30, 2025)

The requirements of the Anti-Money Laundering Regulations for Residential Real Estate Transfers (the "Residential Real Estate Rule") were set to become effective December 1, 2025. The Residential Real Estate Rule requires "reporting persons"⁴ to report non-financed transfers of residential real property to legal entities and trusts.⁵

Pursuant to the Residential Real Estate Rule, the reporting person must submit information necessary to identify themselves, the residential real property being transferred, the transferor, the transferee entity or transferee trust, the individuals representing the transferee entity or transferee trust in the transfer, and the beneficial owners of the transferee entity or transferee trust.⁶ The total consideration paid for the property and certain information about any payments made by the transferee entity or transferee trust must also be reported.⁷

On September 30, 2025, FinCen issued an Exemptive Relief Order delaying the effective date of the Residential Real Estate Rule until March 1, 2026. Therefore, reporting persons are not required to report transactions that close before March 1, 2026.

C.S. v. R.H., 2025 NY Slip Op 51426(U) (Sup. Ct., N.Y. Cnty., Sept. 8, 2025)

In C.S. v. R.H., the Supreme Court of New York County addressed whether the Court could consider the value of marital assets placed into irrevocable trusts when crafting an equitable distribution award, without distributing the assets or dissolving the trusts.

The parties were married for nearly twenty-four years. Early in the marriage, the wife earned $52,000 as a financial reporter, while the husband was an equity partner at Spear Leeds & Kellogg, earning $2,000,000 annually. In 2000, the firm was sold to Goldman Sachs for $6.5 billion, and the husband's share of that sale brought the couple's net worth to roughly $120 million.

In 2001, the husband created two irrevocable trusts: the R.H. 2001 Family Trust for the benefit of the couple's daughters, and the R.H. 2001 GST Trust, for their grandchildren. These trusts...