Tax-Savvy Estate Planning Strategies: How to Protect More of Your Legacy

When most people think about estate planning, they focus on who will receive their assets. Just as important, however, is how much of those assets will be lost to taxes.

With thoughtful planning, many families can significantly reduce—or even eliminate—unnecessary taxes and ensure that more of their hard-earned wealth passes to loved ones and charitable causes.

Below are several key strategies to consider when building a tax-efficient estate plan.

Understanding Federal and State Estate Taxes

Federal estate taxes currently apply only to very large estates—currently (2026), those exceeding $15 million for individuals and $30 million for married couples. If owed, the estate tax is paid by your estate.  Most estates will never owe federal estate tax.  There is no federal inheritance tax levied against your beneficiaries.

In addition, unlike 17 states and the District of Columbia(https://www.kiplinger.com/retirement/inheritance/601551/states-with-scary-death-taxes) , Wisconsin does not impose its own estate tax or inheritance tax, which is good news for Wisconsinresidents.

Importantly, tax laws can change.  A couple of decades ago, the federal estate tax applied to estates exceeding $600,000.  Families with growing assets should plan proactively.

You can learn more about current federal estate tax thresholds from the
Internal Revenue Service (IRS):
👉 https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax

For Wisconsin-specific tax information, visit the
Wisconsin Department of Revenue:
👉 https://www.revenue.wi.gov

Reducing Estate Taxes Through Lifetime Gifting

One of the most effective ways to reduce the size of your taxable estate is through lifetime gifting.

Under current law, you may give up to $19,000 per person each year without using any of your lifetime estate and gift tax exemption. These annual gifts can be made to multiple people and given every year.

In addition, you may pay tuition and medical expenses for your loved ones.  As long as the payments are made directly to an educational institution and/or a healthcare provider, these payments do not count toward the annual gift limit.

These strategies allow you to:

• Support family members while you are living

• Reduce your taxable estate

• Maintain control over long-term planning

Learn more about gift taxes and exclusions here:
👉 https://www.irs.gov/businesses/small-businesses-self-employed/gift-tax

Using the “Step-Up in Basis” to Protect Investments

Many families own assets like, real estate, stocks and mutual funds, and precious metals.

When these assets are sold during life, capital gains taxes likely apply to the increase in value.

Nonetheless, when investments are inherited, they generally get what is known as a “step-up in basis.” This means the asset’s value is reset to its fair market value at the date of death.

As a result, beneficiaries usually do not pay capital gains taxes on appreciation that occurred during your lifetime.

For example, if you purchased stock for $50,000 and it is worth $200,000 at your death, your beneficiary’s tax basis is typically $200,000—not $50,000.

This can result in substantial tax savings.

More information on capital gains and basis:
👉 https://www.irs.gov/taxtopics/tc703

Smart Charitable Giving Through Your Estate Plan

Not all assets are taxed the same way. Some assets—particularly retirement accounts and savings bonds—remain subject to income tax even after death.

These include:

• Traditional IRAs

• 401(k)s and other retirement plans

• U.S. savings bonds

If you plan to leave part of your estate to charity, these assets can be ideal tools.

Qualified charities do not pay income tax. When they receive retirement accounts or savings bonds, they receive the full value without tax reduction.

This strategy allows you to support causes you care about, reduce overall taxes, and preserve other assets for family members.

Learn more about charitable giving and taxes: [I did a blog on 2/8/24 about this]
👉 https://www.irs.gov/charities-non-profits

Why Tax Planning Should Be Part of Every Estate Plan

Even if your estate is well below federal limits, tax planning remains an important part of a comprehensive estate plan. Proper planning can help:

• Avoid unnecessary taxes

• Reduce administrative costs

• Protect beneficiaries

• Preserve long-term family wealth

• Support charitable goals

Every family’s situation is different. A personalized estate plan ensures that your goals are met in the most efficient way possible.

Let’s Create a Plan That Works for You

Estate planning is not just about documents—it is about peace of mind. With the right guidance, you can protect your assets, support your loved ones, and leave a lasting legacy.

If you would like help creating or updating your estate plan, contact our office to schedule a consultation. Together, we can build a plan tailored to your family, your finances, and your future.