Estate Planning Guide: Estate Tax, Trusts, CRTs & Wealth Transfer Calculators

Estate taxes can consume 40% of a taxable estate above the federal exemption — and some states impose their own estate taxes at much lower thresholds. But with proper planning, most families can dramatically reduce or eliminate estate tax while transferring wealth efficiently to heirs and charity. This hub covers every strategy and calculator.

Federal Estate Tax

The federal estate tax applies to estates exceeding the exemption amount at a flat 40% rate. For 2026, the exemption is approximately $13.99 million per individual ($27.98 million for married couples using portability).

Sunset risk: The current elevated exemption is scheduled to revert to approximately $7 million (inflation-adjusted) in 2026 unless Congress acts. Planning now — before the exemption decreases — is critical for estates between $7M and $14M.

State Estate Taxes

Twelve states (plus DC) impose their own estate taxes with much lower exemptions:

Massachusetts and Oregon: $1 million exemption
Illinois: $4 million exemption
New York: $7.16 million exemption (with a "cliff" at 105% that eliminates the entire exemption)
Washington: Up to 20% rate on the largest estates

For multi-state domicile situations, strategic planning around which state is your primary residence can save millions.

Key Estate Planning Strategies

Lifetime Gifting

The annual gift tax exclusion ($18,000 per recipient in 2025) allows unlimited tax-free giving. Married couples can give $36,000 per recipient per year. Over 10 years to 5 children, that's $1.8 million removed from the taxable estate.

Irrevocable Life Insurance Trust (ILIT)

Life insurance proceeds are included in your estate if you own the policy. An ILIT owns the policy instead — keeping the death benefit out of your estate while providing liquidity to pay estate taxes or replace wealth.

Charitable Remainder Trust (CRT)

A CRT allows you to:

Transfer appreciated assets to the trust (avoiding immediate capital gains)
Receive an income stream (CRUT pays a percentage of trust assets; CRAT pays a fixed amount) for life or a term of years
Claim a partial charitable income tax deduction
Leave the remainder to charity at death

CRTs are particularly powerful for highly appreciated, low-basis assets where direct sale would trigger large capital gains taxes.

CRUT vs CRAT

CRUT (Charitable Remainder Unitrust): Income fluctuates with trust asset value; better in rising markets
CRAT (Charitable Remainder Annuity Trust): Income is fixed; provides more certainty but less upside

Qualified Opportunity Zone Investments

Gains deferred through Opportunity Zone investments may qualify for reduced estate valuation treatment in some structures, adding another dimension to estate planning for real estate investors.

Private Placement Life Insurance (PPLI)

PPLI combines life insurance tax treatment with private investment fund access. For ultrahigh-net-worth individuals, PPLI can shelter investment returns from income and estate tax simultaneously — but requires large minimum investments and careful structure.

Step-Up in Basis

At death, inherited assets receive a step-up in basis to their fair market value. This eliminates all embedded capital gains — a critical consideration when deciding whether to sell assets during life or hold them for heirs.

Gift Tax

The federal gift tax shares the same lifetime exemption as the estate tax — gifts and bequests both draw from the same $13.99 million unified credit. Strategic gifting during life reduces the taxable estate while leveraging the following exclusions:

Annual exclusion: $18,000 per donee per year (2025–2026) with no reporting required and no impact on your lifetime exemption. Married couples can combine to $36,000 per donee.
Lifetime exemption: The $13.99M unified exemption covers cumulative taxable gifts beyond the annual exclusion — but every dollar used during life reduces the estate tax exemption available at death.
Direct tuition and medical payments: Payments made directly to educational institutions (tuition only) or medical providers on behalf of anyone are excluded from gift tax entirely, unlimited in amount, and don't count against the annual exclusion or lifetime exemption.

The Gift Tax Calculator helps estimate whether a planned gift will require filing a gift tax return (Form 709) and how it affects your remaining lifetime exemption.

Capital Gains Tax Hub — Step-up in basis, QSBS, and gain minimization
Retirement Planning Hub — Inherited IRAs, beneficiary designations, and RMD planning
Real Estate Investing Hub — Transferring real estate through trusts and 1031 exchanges
Federal Income Tax Hub — Income tax consequences of estate planning strategies
State Tax Hub — Domicile planning to minimize state estate taxes
Capital Gains Tax Hub — Step-up in basis at death