Rhode Island Estate Tax Planning for 2026: Why Trusts Matter for Married Couples and Homeowners

Estate planning in Rhode Island requires careful attention to state-specific tax rules—especially for married couples and individuals who own real estate throughout the Ocean State. While many people assume estate taxes only affect the very wealthy, Rhode Island’s relatively low exemption means that a large number of estates may be subject to tax without proper planning.

For 2026, the Rhode Island estate tax exemption is $1,838,056. Estates valued above this amount may owe Rhode Island estate tax, even if no federal estate tax is due. Given current real estate values in Rhode Island’s housing market, this threshold is easier to reach than many people expect—particularly for homeowners in desirable Rhode Island communities like East Greenwich, Barrington, Little Compton, Newport, and Narragansett.

Why the Rhode Island Estate Tax Threshold Matters

Unlike the federal estate tax exemption (which is over $13 million for 2026), Rhode Island’s exemption applies at a much lower level. This means that Rhode Island homeowners, landlords, and long-time residents who have accumulated assets over time may unintentionally exceed the Rhode Island estate tax threshold.

Assets Commonly Included in a Taxable Rhode Island Estate

• Primary residences in Rhode Island
• Rhode Island rental or investment properties
• Retirement accounts (401(k), IRA, pension plans)
• Brokerage accounts and investment portfolios
• Life insurance proceeds (in certain cases under Rhode Island law)
• Business interests in Rhode Island LLCs or corporations

For married couples in Rhode Island, the way assets are structured and transferred can make a substantial difference in whether Rhode Island estate tax is owed.

The Role of the Unlimited Marital Deduction in Rhode Island — and Its Limits

Under current federal and Rhode Island law, spouses may transfer assets between each other without estate or gift tax consequences using the unlimited marital deduction. This allows assets to pass to a surviving spouse at the first death without triggering Rhode Island estate tax.

However, this benefit can create a false sense of security for Rhode Island married couples.

If all assets pass outright to the surviving spouse, the entire combined estate may be exposed to Rhode Island estate tax upon the second spouse’s passing. Without additional planning, the first spouse’s Rhode Island estate tax exemption may be wasted.

The Rhode Island Estate Tax Problem for Married Couples

Consider this example:

Spouse A dies in 2026 with an estate valued at $1.5 million (within the Rhode Island exemption). All assets pass outright to Spouse B using the unlimited marital deduction. No Rhode Island estate tax is due at the first death.

However, Spouse B now has a combined estate of $3 million (their original $1.5 million plus the inherited $1.5 million).

When Spouse B dies, only one Rhode Island estate tax exemption of $1,838,056 is available. The remaining $1,161,944 is subject to Rhode Island estate tax at rates up to 16%.

Result: The couple pays Rhode Island estate tax on over $1.1 million that could have been sheltered if proper trust planning had been implemented.

How A & B Trusts (Marital and Family Trusts) Help Rhode Island Married Couples

To address this issue, many Rhode Island married couples use a trust-based planning strategy involving:

1. A Marital (A) Trust, and
2. A Family or Credit Shelter (B) Trust

These trusts are designed to work together under Rhode Island law to:

• Preserve the first spouse’s Rhode Island estate tax exemption
• Take advantage of marital status without unnecessary Rhode Island tax exposure
• Protect assets for children or other beneficiaries
• Reduce or eliminate Rhode Island estate tax at the second spouse’s death

How A & B Trust Planning Works in Rhode Island

At the first spouse’s death:

The B Trust (Credit Shelter Trust) is funded with assets up to the Rhode Island estate tax exemption amount ($1,838,056 in 2026). These assets are removed from the surviving spouse’s taxable estate while still providing income and access for the surviving spouse.

The A Trust (Marital Trust) holds the remaining assets, which pass to the surviving spouse using the unlimited marital deduction.

At the second spouse’s death, the B Trust assets are not included in the taxable estate, significantly reducing or eliminating Rhode Island estate tax liability.

When properly structured by a Rhode Island estate planning attorney, this type of planning allows couples to maximize available exemptions while still ensuring the surviving spouse has access to assets.

Why Trust Planning Is Especially Important for Rhode Island Real Estate Owners

Real estate ownership is one of the most common reasons estates exceed the Rhode Island exemption threshold — particularly in high-value Rhode Island markets.

Rhode Island Real Estate Market Values (2026)

• Newport waterfront properties: Often $2-10+ million
• East Greenwich single-family homes: Median $600,000-$900,000
• Providence East Side: Homes frequently exceed $800,000
• Barrington residential properties: $600,000-$1.5 million
• Narragansett and South County coastal homes: $700,000-$3 million+

Trust planning can be particularly beneficial for Rhode Island property owners by:

• Avoiding probate delays and costs in Rhode Island Probate Court
• Preventing forced sales to pay Rhode Island estate taxes
• Preserving continuity of ownership for Rhode Island properties
• Providing clear management authority during incapacity or after death
• Protecting Rhode Island real estate investments for children and grandchildren

This is true whether you own a single-family home in Warwick, multiple rental properties in Providence, or mixed residential and commercial real estate throughout Rhode Island.

Additional Benefits of Trust Planning for Rhode Island Residents

Beyond Rhode Island estate tax savings, properly structured trusts provide:

Protection During Incapacity

If you become incapacitated, your revocable living trust allows your designated successor trustee to manage your Rhode Island assets without requiring a conservatorship proceeding in Rhode Island Probate Court.

Privacy

Unlike wills, which must be filed in Rhode Island Probate Court and become public records, trusts generally remain private documents.

Creditor Protection for Beneficiaries

Assets held in properly structured trusts may be protected from beneficiaries’ creditors, divorces, and lawsuits under Rhode Island law.

Control Over Distribution Timing

You can specify when and how beneficiaries receive Rhode Island assets — for example, at certain ages, for education, or for health needs.

Common Rhode Island Estate Planning Mistakes We See

Some of the most frequent issues arise when:

• Estate plans were created before significant Rhode Island real estate appreciation (particularly pre-2020)
• Documents predate marriage or changes in family structure
• Wills rely solely on outright distributions between spouses without trust planning
• Trusts exist but are outdated or improperly funded with Rhode Island assets
• Couples assume the federal exemption amount applies in Rhode Island (it doesn’t — Rhode Island has its own much lower threshold)

Regular review with an RI estate planning attorney is essential to ensure documents reflect both current Rhode Island law and current asset values.

Rhode Island Estate Tax Planning Strategies Beyond A & B Trusts

For Rhode Island residents with larger estates, additional strategies may include:

Lifetime Gifting

Making gifts during your lifetime can remove assets from your taxable Rhode Island estate. The federal annual exclusion is $18,000 per recipient in 2026.

Irrevocable Life Insurance Trusts (ILITs)

Removing life insurance from your taxable Rhode Island estate while providing liquidity for beneficiaries and estate tax payments.

Qualified Personal Residence Trusts (QPRTs)

Transferring your Rhode Island home at a reduced gift tax value while retaining the right to live there.

Charitable Remainder Trusts

Providing income during life while benefiting Rhode Island charities and reducing estate tax.

How to Get Started with Rhode Island Estate Tax Planning

1. Schedule a consultation with an RI estate planning attorney experienced in Rhode Island estate tax law
2. Gather information about your Rhode Island assets (real estate, accounts, life insurance)
3. Discuss your goals for asset distribution and family protection
4. Review existing documents (if any) to identify gaps or outdated provisions
5. Implement recommended strategies including trust creation and asset retitling
6. Fund your trusts by transferring Rhode Island real estate and other assets
7. Review regularly (at least every 3-5 years or after major life events)

Rhode Island vs. Massachusetts Estate Tax Planning

It’s worth noting that Massachusetts also has a state estate tax with an exemption of $2 million for 2026. However, Rhode Island and Massachusetts have different:

• Exemption amounts
• Tax rate structures
• Portability rules (Massachusetts allows portability, Rhode Island does not)
• Filing requirements and deadlines

For families with assets in both Rhode Island and Massachusetts, coordination is essential.

Final Thoughts

Rhode Island’s estate tax rules make trust planning an important consideration for many families — not just those with large or complex estates. Married couples and real estate owners in Rhode Island, in particular, can benefit from thoughtful planning that preserves exemptions and protects assets for future generations.

If you own real estate in Rhode Island, have seen significant growth in asset value, or have not reviewed your estate plan in several years, a legal review can help determine whether your current documents still achieve your goals under Rhode Island law.

Don’t let Rhode Island estate tax unnecessarily erode the wealth you’ve worked a lifetime to build. Proactive planning today can save your family thousands of dollars in Rhode Island estate taxes and ensure your assets pass according to your wishes.

Contact Pelletier Law, LLC for Legal Services in Rhode Island

Located in Lincoln, Rhode Island, Pelletier Law, LLC serves clients throughout Rhode Island, including Providence, Warwick, Cranston, Pawtucket, East Providence, Woonsocket, Newport, and surrounding communities.

Phone: 401-580-3059
Address: 300 Front Street, Lincoln, RI 02865