Estate Tax Planning

You don’t have to be a billionaire to consider estate tax planning. In fact, most everyone has some assets that they would want to leave to a loved one or donate to a charity upon their passing. However, there may be some tax implications that you will not want your loved ones to deal with. That is where proper estate tax planning can come into play.

What are the different kinds of assets that can affect estate tax planning?

An asset can be a physical item, such as jewelry, a car, furniture, real estate, or any other tangible item that you may want a particular person to have upon your passing. It can also be an intangible item such as a financial account, stock or an insurance policy. When you pass away, these assets could be given to specific people in your life. As there are tax implications for some of these assets, it is best to work with a tax attorney to create a game plan while you can still control and prepare for the future.

Estate Valuation

The process of evaluating the value of your assets versus what debt you may owe is the first step in setting up solid estate tax planning. First, it’s important to define the kinds of assets you have. For instance, do you own real estate? If so, a tax attorney would commission a property valuation report which can determine what your property is worth based on the structure or the land and what the market rates are at the current time. The next step would be to layer onto that whatever mortgage payments may be owed on the property. At that point, you can determine how those assets would be taxed and what you (and your heirs) will be responsible for paying at a particular point in time. This will help you determine your strategy to limit the amount of tax liability that could hit your heirs once they inherit the property.

Taxable Estates

Depending on the circumstances, tax attorneys can determine how much of your estate will be taxable and how much can be avoided if you readjust how your beneficiaries are connected to your assets. Since the actual amount of your taxable estate is based on asset value versus the amount of liabilities (debts or expenses), a tax attorney can help you figure out which of your assets are actually subject to a tax after your death, and which can be passed on to your heirs without taxation. This may impact how you set up a trust or your will.

Estate exemptions are an important ingredient in this equation. If you have dependents, or a spouse, there are certain tax exemptions that can lower or even eliminate the taxable income on an estate.

Non-probate Assets

Non-probate assets are those which you have designated to a beneficiary. Throughout your life you may be in a situation where you have to designate a beneficiary such as a life insurance policy, an IRA, a pension plan or an annuity contract. It could also be that you have property that is owned jointly where the other party automatically has a right to full ownership in the event of your death.


These are very clear-cut examples of non-probate assets. In most cases, these plans and accounts require you to designate a beneficiary as part of the process when you first establish your plan or account. Once the beneficiaries are established, you do not have to include them in your will. Although, it might be a good idea to keep information about these accounts somewhere handy in the case of your death so your executor can find them and execute the proper notification to the institution carrying the account.


The tax implications on non-probate assets can vary. There is usually an executor, administrator, or some other designated person who is responsible for making sure the assets are distributed and taxes are paid. It is important to have your tax attorney explain all tax implications to you before you establish who your beneficiaries are so you can anticipate any estate tax planning.

Payable on Death (POD)

A Payable on Death (POD) account is a type of bank account which automatically transfers ownership and control of the account to a named beneficiary upon your death. A POD account is useful because account funds do not have to go through probate and be accounted for in the estate valuation — the funds in the account would simply transfer automatically to the intended beneficiary. Some people decide to name the executor of their will as the beneficiary so that the executor has funds available to cover any unforeseen miscellaneous expenses that may come from administration of the estate. However, a POD account can be transferred to whomever you decide you want your funds to go to upon your death. Keep in mind, depending on the amount of funds in the account and the beneficiary’s financial situation, there may be unintended and undesired tax consequences when control of the account is transferred. A tax attorney would be able to help you understand the consequences and how to avoid them if so desired.

Deferral status

There are situations where a beneficiary may want to defer receiving an inheritance, such as waiting finalization of a divorce, or the beneficiary has not reached the age of majority, the beneficiary has current creditors to whom the funds would go, or the receipt of the inheritance would come with a tax consequence, such as an IRA or other retirement account that would qualify as income in respect of a decedent, which would be taxable upon receipt. In this case you would want to include language in your will or trust instrument that the disbursement only take place upon the happening of a certain event, i.e. the beneficiary reaching a certain age, the divorce becoming final, the beneficiary’s creditors fully paid, etc. A knowledgeable tax attorney would know what language would need to be in place to ensure that your property and assets go to the intended recipient for the purpose you desire.

Bottom line is that the world does not stop turning once you are deceased. You want to make sure that your assets do not turn into a hardship for those surviving you.

Planning tax consequences ahead of time can save everyone involved a great deal of emotion, angst, and money.

Work with a knowledgeable estate tax planning attorney to ensure your estate and any tax implications are handled properly.