Estate Planning
The gross estate
Everything the decedent owns or controls: probate assets, jointly held property, life insurance where the decedent held incidents of ownership, retained interests, and powers of appointment. Beneficiary designations and jointly held property pass outside probate; a will controls only probate assets.
Transfer tax
Estate, gift, and generation-skipping transfer taxes share one unified credit ($13,990,000 per person in 2025). The annual exclusion ($19,000 in 2025) allows unlimited recipients without touching the credit. Portability lets a surviving spouse use the deceased spouse's unused exclusion if a timely Form 706 is filed.
Tools
- Revocable living trust: avoids probate, does not save estate tax
- Credit shelter (bypass) and marital trusts
- Irrevocable life insurance trust: removes proceeds from the estate
- GRAT, QPRT, charitable remainder and charitable lead trusts, family limited partnerships
Traps
- Inherited assets receive a basis step-up; gifted assets carry over basis - the reverse of what many candidates assume.
- Gifts within three years of death are generally pulled back only for certain retained interests and life insurance.
- Joint tenancy with a non-spouse can create an unintended gift at creation and may put the whole asset in the first decedent's estate.
- Dying intestate means state law, not client wishes, controls.
Worked example. In 2025 a client gifts $150,000 to one child. $19,000 is excluded; $131,000 is a taxable gift that reduces lifetime exemption. No tax is due, but Form 709 is required.