The 65‑Day Election | How You Can Still Cut Your Prior‑Year Tax Bill

What is the 65-Day Election?

• The 65-Day election allows complex trusts and estates to treat distributions made within the first 65 days of the new tax year as if made on the last day of the prior year.
• The election applies to distributions made from January 1 to March 5 (for calendar-year entities), up to the greater of fiduciary accounting income or distributable net income (DNI), reduced by prior distributions.

Why Make the Election? Tax-Saving Opportunities

• Trusts and estates often pay income tax at a much higher rate than individual beneficiaries. For 2025, trusts and estates reach the top 37% tax rate bracket on income over $15,650.
• You can lower or eliminate the 3.8% Net Investment Income Tax (NIIT) at the trust/estate level, since the NIIT threshold for trusts is much lower than for individuals.
• You may reduce state income tax liability if the state uses federal taxable income as a starting point.

How Trustees and Advisors Can Maximize the 65-Day Election

• Calculate prior-year fiduciary accounting income and DNI as soon as possible after year-end.
• Project beneficiaries’ tax situations to determine the optimal distribution amount.
• Make and document eligible distributions within the first 65 days (by March 5 for calendar-year trusts).
• Maintain detailed records of calculations and communications.
• Make the election on a timely filed Form 1041, with a supporting statement.
• Ensure K-1s are accurate and beneficiaries are informed of tax consequences.

Conclusion:

• The 65-day election is a powerful tool for high net worth families using irrevocable trusts and families with open estates.
• Even though it is already 2026, trustees and advisors can still influence last year’s tax bill and optimize overall tax outcomes.