Definition
Estate planning encompasses wills, trusts, beneficiary designations, power of attorney, and tax optimization strategies for wealth transfer. The federal estate tax exemption is $13.61M per person (2024). Step-up in basis eliminates capital gains tax on inherited assets. Irrevocable trusts, gifting strategies, and charitable giving can reduce taxable estates. Estate planning affects retirement account beneficiary designations and withdrawal strategies.
lightbulb Example
An investor with a $5M estate uses: $18,000/year annual gift exclusion per recipient, $200K in donor-advised fund contributions (immediate tax deduction), and an irrevocable life insurance trust to remove the death benefit from the taxable estate.
verified_user Key Points
- Encompasses wills, trusts, beneficiary designations
- Federal estate tax exemption: $13.61M/person (2024)
- Step-up in basis eliminates unrealized gains at death
- Annual gift exclusion: $18,000/person/year