Estate Planning

“Anyone may arrange his affairs so that his taxes shall be as low as possible.”  – Learned Hand, Tax Court Judge, 1934

With planning and some tolerance for a little complexity, it is relatively easy to set up your estate so that your heirs pay no estate tax.  The secret is to get very clear on what you want, learn about your options, and then act decisively. 

Estate Planning 101

Estate planning allows you to decide where you want your stuff to go – not only upon your death but also while you are still here.  You have three choices:  Family, charity, or the United States Treasury.   We live in a country with a transfer tax – a tax on the right to transfer property.  During life, it is called gift tax.  Upon death, it is called estate tax.   

There are four (4) primary weapons against transfer tax: 

  1. Annual exclusions – $14,000 per person
  2. Unlimited marital deduction 
  3. $5.34M gift and estate lifetime exemptions
  4. $5.34M generation-skipping transfer (GST) tax exemption 
Goals and Objectives

It is vital that you and your advisor are clear on your goals and objectives before you begin to plan your estate. A good architect will ask, “How many cars do you have?” not, “How many square feet do you want your garage to be?” You need to understand the advantages, costs, and risks of all your options; your most effective option may be one you’re not even aware of!

Develop Future Family Leaders

One critical factor lies at the core of a successful estate plan.  If your goal is to sustain the family wealth far into the future and protect your estate from creditors, spendthrifts, taxes, and ex-spouses, you must develop the future leaders of your family.  Who will take your place?  Who will be your backup?  It is about mutual agreements, not governance rules.  It is about communication, teaching, and instilling the values that are the foundation of what you have built.

Foundational Planning

If you don’t have your basic estate planning done, or if you have not updated it “since the kids were born,” it is not because you don’t want to think about it.  It is because you have not found someone you trust, someone who will listen to what you want, someone who will ask the right questions, someone who will explain the good and the bad, the risks and the rewards – all in plain English.  Foundational planning is not expensive, time consuming, or complicated.  Get it done and make sure you understand what you have, why you have it, and how your plan works.


Annual tax free gifts to your beneficiaries are good planning. Over the long run, they transfer significant sums of money – and their appreciation – out of your estate and reduce your tax liability.

Comprehensive planning allows strategic gifts to leverage into larger sums.  For example, gifts to a trust to pay life insurance premiums make sense for almost everyone.  When combined with discounts and moving the assets into trusts, gifts turn into a very powerful estate tax planning strategy.

Estate Liquidity - Life Insurance

Estate taxes are due and payable in cash nine (9) months from the date of death, and estate tax rates and deductions/exclusions change frequently.  Nobody knows when they will die, and nobody knows what estate tax rates and exemptions will be in any given year.  Inheritance tax is like a hurricane; we don’t know how much damage it can do to an estate until it hits. 

Constantly adjusting your assets year-to-year in response to estate tax changes is impractical and time-consuming.  A well-designed, properly-acquired and managed life insurance policy is the single best asset for preserving estate liquidity in the face of long-term fluctuations in estate tax liability.


There are strategies which allow you to gift assets at a discounted value, using up less of your exemption which allows you to transfer more assets free of tax.  These strategies are under IRS scrutiny and there is political pressure to eliminate these advantages, so most advisors agree you should use it before you lose it!


A freeze strategy allows an asset to grow without adding to your taxable estate.  If your business is rapidly growing and generates a lot of income, it can be a tremendous benefit to transfer some or all of it to a trust that is not included in your net worth for estate tax purposes.  In addition, one of the strongest estate planning strategies left in the tax code, allows you to pay the income tax on this asset that is no longer in your estate. If your goal is to transfer wealth to your heirs, paying income tax for them is a huge advantage, letting the asset compound without the drag of taxes.  Essentially, you are making a tax-free gift to your heirs in excess of the allowable annual and lifetime amounts.

Zero Estate Tax Plan

After you have maximized your gifting, taken discounts to the limit, and sold assets to trusts to freeze their value, you may still have assets exposed to federal estate tax.  Creating a zero estate tax plan leaves the entire taxable amount of your estate to a family-run charity (often a private foundation) so they can enjoy the benefits of philanthropy.

Touching All the Bases

Sophisticated estate planning sometimes comes with some complexity.  Discounts, freezes, insurance trusts, and even annual gifting plans require documentation, administration, and sometimes even tax returns.  Most entrepreneurs would agree this is not their most refined skill or the best use of their time or even company resources.  A multi-family office can administer and manage all of this complexity for you, so that you can focus on what you do best.