Intro to Estate Planning

Proper estate planning can help your property pass to your loved ones with fewer delays and added costs, and in a manner that meets your intentions. It can help implement your goals, such as leaving property to loved ones, providing for your children, planning for incapacity, avoiding probate where appropriate, reducing estate taxes, and more.

Please note that this is by no means a comprehensive list—nowhere near—but an introductory look into estate planning.

Planning opportunities for limiting your estate

1. Transferring property during your life as a gift

• The recipient generally receives the donor’s carryover tax basis for determining gain, subject to applicable adjustments and special rules.
• The lifetime federal gift and estate tax basic exclusion amount is $13.99 million in 2025 and $15 million in 2026, with annual inflation adjustments beginning in 2027.
• When gifted property is sold, the gain generally is calculated using the recipient’s adjusted tax basis, rather than simply the original purchase price. The tax treatment depends on the asset and the applicable rules.
• Gifts above the annual exclusion generally must be reported on IRS Form 709 and use part of the available lifetime exclusion, unless another exclusion or deduction applies. Under Revenue Procedure 2024-40, the annual exclusion for 2025 is $19,000 per recipient, per donor, for qualifying gifts.

Gifting property or assets can help reduce your estate by giving up ownership and control of those assets. Consider this example: You purchase $50,000 of stock this year and plan to hold it long term. You are currently 55, and for this example assume you live to age 88.

At a hypothetical 9% annual compound growth rate over those 33 years, the stock could be worth approximately $859,101. This illustrates how gifting an asset earlier can move significant future appreciation outside your estate. The assumed return is illustrative, rather than guaranteed.

The gift may be made to an individual or through an appropriately structured trust. However, simply placing an asset in a trust does not automatically remove it from your estate; the trust’s terms and any rights you retain matter. A taxable lifetime gift may also use part of your available gift and estate tax exclusion.

2. Transferring property at death as an inheritance

• The recipient generally receives a basis adjustment to fair market value at the date of death, often referred to as a step-up in basis. Exceptions apply.
• A subsequent sale generally produces gain to the extent the amount realized exceeds the recipient’s adjusted basis.
• Includible property generally enters the gross estate at fair market value on the date of death, subject to applicable valuation rules.

Transferring property at death may therefore create estate tax exposure. However, the result depends on the overall estate, applicable deductions, prior taxable gifts, and the available exemption—not whether one property alone exceeds the exemption.

Gifting strategies

• Utilizing the deceased spousal unused exclusion amount (DSUE) through portability.
• Gifting assets strategically up to the annual exclusion.
• Utilizing trusts to manage how beneficiaries handle and access assets.
• Leaving assets to qualifying charities to reduce the taxable estate through the estate tax charitable deduction under Section 2055, subject to the qualification requirements.
• Paying qualifying tuition or medical bills directly to the school or medical provider, rather than gifting the money to the individual. Section 2503(e)(2)(A) addresses tuition and Section 2503(e)(2)(B) addresses medical care. Qualifying direct payments are excluded from gift tax without an annual dollar cap.

Important estate planning documents

Important estate planning documents should be reviewed periodically, especially during major life events. An estate plan commonly includes:

• Will: Directs how assets passing under the will should be distributed and names an executor.
• Trust, when appropriate: Sets out how assets held in the trust should be managed and distributed.
• Power of attorney: Allows someone to handle specified financial matters on your behalf.
• Advance health care directive or living will: Documents your wishes for medical treatment, including end-of-life care.
• Beneficiary designations: Identify who should receive accounts or benefits passing through those designations.

Charitable giving intentions should also be coordinated with these documents and the overall plan.

The process and benefits of estate planning

• Asset inventory: Accounting for your assets and their values.
• Minimizing taxes: Reviewing available tax-planning opportunities.
• Probate planning: Considering how assets will pass and whether probate can be avoided where appropriate. Probate is the court-supervised process of validating a will and administering the estate.
• Planning for incapacity and funeral arrangements: Making your preferences known and preparing for someone to act when needed.

Important considerations

Importance of wills: Wills are key legal documents that help direct the distribution of assets passing under the will according to your wishes. Without a will, unmarried partners and stepchildren generally are not entitled to inherit under intestacy laws solely because of that relationship. Adoption, beneficiary designations, trusts, ownership arrangements, and applicable state law can affect the outcome.

For more information on the tax considerations of estate planning, please schedule a call with our office for a consult. Legal documents should be coordinated with your estate planning attorney.