Beginning to Think About Estate Planning

When you hear the term “estate planning,” you might think it’s only about estate taxes or that it applies solely to older people or those with substantial assets. In reality, estate planning encompasses much more than taxes. It addresses what happens if you become unable to make financial or medical decisions for yourself, as well as what happens to your loved ones if you pass away.

Even if you don’t have significant assets now and aren’t concerned about estate taxes, future financial success could change that. Plus, estate tax rules often make headlines as Congress considers changes to tax laws.

Basics of Estate Taxes

The federal government imposes an estate tax—payable by your estate—with rates up to 40% on larger estates. The tax applies to the estate’s value after allowable deductions, such as burial expenses, outstanding debts, charitable contributions, and accrued taxes. Assets left to a surviving spouse are generally excluded from the taxable estate (via the unlimited marital deduction).

After calculating the tax, a substantial credit applies, resulting in many estates owing no federal estate tax. The credit corresponds to the basic exclusion amount, which shields estates below a certain threshold from taxation. Here’s an updated overview:

Year	Estate Size Where Taxation Starts (Basic Exclusion Amount)			Top Estate Tax Rate
2025	$13,990,000			40%
2026	$15,000,000			40%
Future	Indexed annually for inflation			40%

(Note: Married couples can effectively double the exclusion with proper planning and portability, allowing up to $30,000,000 in 2026 to pass tax-free.)

Estate Planning Issues Beyond Taxes

Family communication. In many families, death and money remain taboo topics. Open

discussions with your parents or children can help everyone prepare for the unexpected. Ensure key family members know where to find important documents and are aware of your preferred medical treatment options.

Guardians for minor children. Your will specifies how assets are distributed and allows you to name legal guardians for dependents. You—not the courts—should make these choices. Your will also designates an executor to manage and distribute your estate until it’s fully closed. Select someone capable, trustworthy, and willing to carry out your wishes.

Medical directives. These documents apply if you can’t make healthcare decisions yourself. A durable power of attorney for healthcare authorizes someone to make medical choices on your behalf. A living will (or advance directive) outlines your preferences for treatment if you become terminally ill, including wishes about life support. Some states use separate forms for each.

Durable power of attorney for finances. This authorizes a trusted person to manage your finances and investments if you become incapacitated. Without it, court intervention (such as guardianship proceedings) may be required for even routine matters. Choose someone knowledgeable and reliable, such as an adult child, sibling, or close friend. If no suitable individual is available, consider your attorney or accountant.

Retirement accounts. Carefully select beneficiaries for retirement plans, including IRAs and 401(k)s. In most cases, the beneficiary designation on file—not your will—controls who inherits these assets.

Irrevocable life insurance trusts. Life insurance proceeds are generally income-tax-free but can be included in your taxable estate if you own the policy or if your estate is the beneficiary. If your assets approach levels where estate taxes may apply, consult a qualified attorney about an irrevocable life insurance trust (ILIT) to remove proceeds from your estate and minimize taxes.

Regular estate plan reviews. Review your estate plan periodically—many attorneys recommend every three to four years. Major life changes warrant more frequent reviews, including marriage, divorce, the birth of children or grandchildren, the death of a spouse, significant changes in wealth, or relocation to another state (as laws vary by jurisdiction).

Use an expert. Estate laws are complex, and the consequences of inadequate planning can be substantial. While self-research is helpful, rely on a qualified estate planning attorney to draft and customize documents to your needs.

Estate planning provides peace of mind by protecting you, your assets, and your loved ones. Start the conversation today—it’s never too early.