Estate Tax Planning

Without proper estate tax planning, your wealth may be significantly reduced by taxes, and your assets may not be distributed according to your wishes. Effective estate tax planning helps protect the value of your estate, ensuring that more of your assets go to your loved ones rather than tax liabilities.

By implementing strategic estate tax planning measures, you can minimize tax burdens, safeguard your wealth, and ensure your assets are distributed according to your intentions. Find out how TEAMBASED Tax Services can help you properly plan for estate taxes so your loved ones won’t be left without assistance.

Understanding Your Estate Taxes

The federal estate tax applies to estates exceeding a specific exemption amount, which is subject to change based on legislative updates. Some states impose their own estate or inheritance taxes with varying exemption limits and rates.

In the near future, the federal estate tax exemption could be reduced, which may result in more estates being subject to taxation. This change could significantly impact estate planning strategies, making it essential to consider ways to minimize potential tax burdens.

Important Components of Estate Tax Planning

Wills and Trusts

• Wills: A will is a legal document outlining your assets after death. It allows you to designate beneficiaries and specify the distribution of your property. Without a valid will, your estate may be subject to intestacy laws, which could result in unintended asset distribution.
• Trusts: Trusts are legal arrangements that hold assets on behalf of beneficiaries. They can control asset distribution, offer privacy, and potentially reduce estate taxes. For example, irrevocable trusts can remove assets from your taxable estate, thereby reducing estate tax liability.

Lifetime Gifting 

Utilizing the annual gift tax exclusion allows you to transfer wealth to your heirs during your lifetime without incurring gift taxes. In 2025, the annual gift tax exclusion is $19,000 per recipient. Regular gifting can effectively reduce the size of your taxable estate over time.

Charitable Contributions 

Donating assets to qualified charitable organizations can provide estate tax deductions, thereby reducing the overall taxable value of your estate. This strategy supports causes you care about and offers tax benefits.

Irrevocable Life Insurance Trusts (ILITs) 

Placing a life insurance policy within an ILIT removes the policy’s death benefit from your taxable estate, providing liquidity to cover estate taxes and other expenses. ILITs ensure that insurance proceeds are available for your beneficiaries without increasing estate tax liability.

Grantor Retained Annuity Trusts (GRATs) 

A GRAT allows you to transfer appreciating assets to beneficiaries with minimal gift tax implications. You retain an annuity interest for a specified term, and any remaining value passes to the beneficiaries, potentially reducing estate taxes.

Qualified Personal Residence Trusts (QPRTs) 

A QPRT enables you to transfer your residence to a trust while retaining the right to live there for a specified period. After this period, the residence passes to the beneficiaries, potentially at a reduced gift tax value.

Family Limited Partnerships (FLPs) 

By transferring assets into an FLP, you can retain control over the assets while gifting partnership interests to family members. This strategy may offer valuation discounts for estate and gift tax purposes, effectively reducing the taxable value of transferred assets.

Reviewing Asset Titling and Beneficiary Designations 

Ensuring that your assets are appropriately titled and that beneficiary designations are up-to-date can prevent unintended tax consequences and facilitate the efficient transfer of assets. Regular reviews of these designations are essential, especially after significant life events.

Roth IRA Conversions

Converting a traditional IRA to a Roth IRA can be a strategic move in estate tax planning. Although taxes are paid on the converted amount, future withdrawals are tax-free for your heirs, potentially reducing overall tax liabilities for beneficiaries.

Estate Freeze Strategies

An estate freeze involves transferring appreciating assets to beneficiaries while retaining income rights. This strategy locks in the asset value for estate tax purposes, shifting future appreciation to heirs and minimizing tax exposure.

These are just some of the ways that TEAMBASED Tax Services can help with tax preparation.

Why You Need Regular Estate Plan Reviews

Estate planning is not a one-time event. Reviewing and updating your estate plan is essential, especially after significant life events such as marriage, divorce, the birth of a child, or substantial changes in financial circumstances. Regular reviews ensure that your estate plan remains aligned with your current wishes and adapts to any changes in tax laws.

Utilize Advanced Estate Tax Strategies

For individuals with substantial estates, additional strategies can further mitigate estate tax liabilities:

• Dynasty Trusts: These long-term trusts allow wealth to trickle down multiple generations while avoiding estate taxes at each generational level.
• Spousal Lifetime Access Trusts (SLATs): A SLAT enables one spouse to transfer assets to a trust to benefit the other spouse and future generations while removing those assets from the taxable estate.
• Intentionally Defective Grantor Trusts (IDGTs): This trust structure allows a grantor to transfer assets while maintaining income tax liability, reducing the estate’s value without triggering gift taxes.
• Private Annuities: A private annuity allows asset owners to transfer wealth in exchange for lifetime payments, effectively removing assets from their taxable estate while ensuring income for retirement.
• Qualified Terminable Interest Property (QTIP) Trusts: This type of trust ensures that a surviving spouse receives income from the trust while ultimately passing assets to designated beneficiaries, often children from a previous marriage.

By leveraging these advanced estate tax strategies, high-net-worth individuals can maximize the preservation of their wealth and ensure that their financial legacy endures.

Is Estate Planning Tax Deductible?

After the passage of the Tax Cuts and Jobs Act of 2017, estate planning fees are no longer deductible from your personal income taxes. However, you can deduct the expenses of estate administration against the estate tax itself or against the annual income tax of the estate.

Don’t Forget These Estate Planning Tips

Effective estate tax planning requires careful consideration and proactive management. Here are some tips to help you navigate the process and make the most out of your estate tax plans:

• Start Early: Begin your estate planning as soon as possible to take advantage of various tax-saving strategies.
• Stay Informed: Keep abreast of changes in tax laws that may affect your estate plan.
• Document Everything: Maintain detailed records of your assets, liabilities, and estate planning documents.
• Communicate Your Wishes: Ensure your beneficiaries understand your estate plan to prevent potential conflicts.

At TEAMBASED Tax Services, we specialize in providing comprehensive estate tax planning solutions tailored to your unique needs. Our team of experienced professionals can help you navigate the complexities of estate taxes and implement strategies to preserve your wealth for future generations. Contact us today to schedule a consultation and take the first step toward securing your legacy.