New Bill Proposes Annual Withholding Tax on Trusts with Assets Exceeding $50M

On May 12, 2026, a Bill entitled the “Fair Trusts for Fiscal Responsibility Act” was introduced in the Senate by Sen. Patty Murray and co-led by Sen. Ron Wyden. The proposed legislation would impose an annual “withholding tax” on trusts holding assets in excess of $50M and would serve as an advance collection mechanism in anticipation of future estate tax and generation-skipping transfer tax that would otherwise be imposed upon death or intergenerational transfer.

Under the Bill, withholding rates would apply as follows:

• 1% on assets between $50 million and $100 million;
• 5% on assets between $100 million and $250 million;
• 2% on assets between $250 million and $1 billion; and
• 3% on assets exceeding $1 billion.

The Bill also imposes extensive valuation and reporting requirements on covered trusts (excluding charitable trusts and ERISA-qualified benefit trusts), including annual asset disclosures, trustee reporting obligations, and penalties for underreporting or failure to comply. And the Bill authorizes the Treasury Department to issue regulations addressing valuation methodologies for closely held businesses and other illiquid assets—an issue that would present significant practical and administrative challenges if enacted.

Although the Bill is in its infancy stages and there is no current indication that it will receive bipartisan support, the proposal reflects a broader trend toward legislative scrutiny of long-term (dynasty) trust structures which are commonly used in sophisticated estate planning. For other examples, see a summary of the March 2026 Bill entitled “Getting Rid of Abusive Trusts Act” (the GRATs Act) introduced in the Senate here (limiting the functionality and effectiveness of grantor-retained annuity trusts) and a summary of the Treasury Department’s Fiscal Year 2024 Revenue Proposals here (treating payment of income tax by the grantor of an irrevocable trust as a taxable gift and transfers or sales between the grantor and the irrevocable trust as taxable recognition events).