USA – ARKANSAS Trends and Developments Contributed by: Rebecca Hurst, Jim Smith and Tori Moore, Smith Hurst PLC
ily business interests across generations, including through directed trusts that permit a specialised trust director to manage a concentrated business inter - est while a corporate trustee handles administration. Combined with the elevated federal estate and gift tax exemption and other expanded federal benefits, these developments make Arkansas an increasingly attractive jurisdiction for families seeking to preserve and transition closely held businesses. Charitable giving and family philanthropy Charitable giving and family philanthropy play a prom - inent role in the wealth planning landscape of Arkan - sas, with more than USD5 billion in total individual charitable contributions made in the state in the most recently surveyed years. As is often the case, clients desire to incorporate charitable giving into their plan - ning not only for values-based reasons but also as part of their tax strategy. Popular methods of donat - ing include using one of Arkansas’s donor-advised funds, giving non-cash assets such as securities, real estate and even crops, and making direct distribu - tions from an IRA for donors over the age for required minimum distributions. Beyond these approaches, families increasingly employ more structured vehicles to align their philanthropic goals with their broader estate and tax planning. Private family foundations offer donors maximum control over grantmaking and investment decisions and can serve as a multigenera - tional platform for engaging younger family members in philanthropy, at the cost of stricter regulatory over - sight and lower deduction ceilings than public chari - ties. Charitable remainder trusts allow a donor to: (i) contribute appreciated assets; (ii) defer capital gains; (iii) retain an income stream for life or a term of years; and (iv) leave the remainder to charity; while charitable lead trusts reverse that structure to transfer assets to heirs at a reduced transfer tax cost after a period of charitable payments. The gifting of appreciated non- cash assets remains especially attractive, as it allows donors to avoid capital gains tax on the apprecia - tion while claiming a fair market value deduction – an approach that is well suited to the closely held busi - ness interests, farmland, and marketable securities that feature prominently in Arkansas estates. Because these strategies interact closely with the federal chari - table deduction rules and the elevated estate and gift tax exemption discussed below, practitioners typically
coordinate charitable planning with the family’s overall wealth transfer objectives. Avoiding probate and Arkansas’s generous small estate threshold Arkansas’s “Small Estate Affidavit” exemption is anoth - er well-established feature of state law that makes Arkansas a favourable jurisdiction for estate planning. A Small Estate Affidavit streamlines estate administra - tion by permitting the distributee of an estate to collect and distribute its assets without appointing a personal representative or navigating the complications of pro - bate. While the threshold to qualify as a “small estate” varies by state, Arkansas’s is notably generous, with a maximum of USD100,000. That figure ties for the fifth-highest small-estate threshold in the country and allows a far greater share of residents to take advan - tage of the Small Estate Affidavit than would be possi - ble in most other states. This generous threshold gives Arkansas practitioners a valuable tool for simplifying estate administration and avoiding probate. Arkansas’s Modernised Trust and Asset Protection Framework Over the past several legislative sessions, Arkansas has enacted a series of measures that modernise its trust law and strengthen its asset protection offerings, each described below. While some have been in place longer than others, each offers planning opportuni - ties that increase Arkansas’s standing as a preferred jurisdiction for asset protection and private wealth planning. Arkansas’s 365-year statutory rule against perpetuities In 2023, through Act 719, the Arkansas legislature updated its statutory rule against perpetuities, extend - ing the period within which a nonvested property inter - est must vest or terminate from 90 years to 365 years after the interest’s creation. Act 719 applied the same extension to both general and non-general powers of appointment. This expansion grants Arkansas families considerably greater flexibility in structuring complex dynasty trusts for intergenerational planning. For the growing number of high net worth families in North - west Arkansas, it means that wealth can be preserved in-state for future generations of descendants with far greater security.
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