Editor's note: This post was originally published March 31, 2023, and has been updated for accuracy, comprehensiveness and freshness on May 15, 2025.
When it comes to preserving your wealth for future generations, estate tax planning is a critical component that shouldn't be overlooked. Proper planning ensures your hard-earned assets are protected and transferred smoothly to your loved ones without unnecessary tax burdens.
We asked Craig Tarpinian, a LegalShield provider lawyer with Powers Chapman in Michigan, to offer his insight on this topic. He contributed some essential information to help lay out the basics of this complex topic.
Craig starts out with a warning: "Obviously, if you do not plan for the wealth you have, you will have to pay a hefty tax.” So let’s find out what you can do to plan for the future of your finances—including your taxes!
Estate tax planning involves legal strategies to minimize taxes on your estate when transferring wealth to your heirs. Without proper estate tax planning, a significant portion of your assets could go to the government instead of your beneficiaries.
Estate taxes are imposed taxes on the transfer of assets after death. Unlike income taxes that you pay throughout your lifetime, estate taxes are paid by your estate before assets are distributed to beneficiaries. In some states, heirs may also face inheritance taxes on what they receive. State laws can vary so you should seek advice and assistance from an attorney in the appropriate state.
"In the state of Michigan, there is no inheritance tax or state estate tax. However, there is a Federal Estate Tax. An estate tax return (IRS 706) is required to be filed when the total value of the decedent's estate exceeds the federal tax exemption," notes Craig.
Who needs estate planning and taxation guidance? While federal exemptions are high, many individuals still benefit from proactive planning:
"The current exemption is $13,990,000. If you exceed this amount, then you will have to pay tax. This amount is due to sunset through Congress, so the amount in 2026 will be different," explains Craig Tarpinian.
People who would benefit from estate tax planning include:
"The current rates for taxes that exceed the exemption is from 18% to 40%," adds Tarpinian, highlighting the potential financial impact of insufficient planning.
One of the foundations of inheritance tax planning advice is maximizing available exemptions:
Married couples can "split" gifts.
Trusts are powerful estate tax planning strategies that can significantly reduce tax liability.
"Ways you can reduce the tax are by setting up an irrevocable trust or preparing an irrevocable life insurance trust," recommends Craig Tarpinian.
Consider these trust options:
Life insurance plays a crucial role in inheritance tax planning. Insurance proceeds are generally income tax-free to beneficiaries. Consider an irrevocable life insurance trust (ILIT) to help shield proceeds from estate taxes. Insurance policies can provide liquidity to pay estate taxes without forcing the sale of other assets. Another type of insurance policy is the second-to-die policy, which can offer cost-effective coverage for married couples.
Integrating philanthropy into your estate planning and taxation strategy offers multiple benefits.
"This is a tax that is usually for the wealthy. Ways you can reduce the tax are by charitable giving," notes Craig Tarpinian, highlighting one of the most effective ways to reduce your estate tax burden.
Consider these charitable strategies:
FLPs are particularly valuable for family businesses and real estate:
Married couples have additional estate tax planning strategies. An unlimited marital deduction allows for the transfer of unlimited assets to your spouse, tax-free. Portability allows a surviving spouse to use the deceased spouse’s unused exemption amount. You could also consider a bypass trust, which helps to preserve the deceased spouse’s exemption while providing for the surviving spouse. A qualified terminable interest property trust (QTIP) provides for a spouse while ensuring assets ultimately pass to children from a previous marriage.
Even well-intentioned estate plans can fall short if you:
Navigating the complexities of estate tax planning requires professional guidance. LegalShield provides affordable legal access to help you develop and implement effective estate tax planning strategies.
LegalShield provider law firms can:
LegalShield provider firms can help connect you with a provider attorney when required for complex estate tax situations.
Estate planning isn't a one-time event but an ongoing process that requires regular review and updates. With LegalShield, you gain access to qualified attorneys who can help ensure your estate plan remains effective and legally compliant without the high hourly rates typically associated with estate planning attorneys.
Don't leave your legacy to chance. Proper estate planning and taxation strategies can save your heirs unnecessary taxes while ensuring your wishes are carried out.
Contact LegalShield today to learn how affordable legal plans can help you implement effective estate tax planning solutions tailored to your unique situation.
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Mr. Tarpinian was born in Detroit, Michigan. He received his Bachelor of Arts Degree from Michigan State University in East Lansing, Michigan. He received his Juris Doctorate from the Thomas Cooley Law School in Lansing. Mr. Tarpinian is currently an Adjunct Assistant Professor at Madonna University in Livonia. He is a former Adjunct Professor at Oakland Community College. Mr. Tarpinian is a Licensed Michigan Real Estate Agent and was a Past President of the Armenian-American Bar Association. He is the recipient of a Distinguished Service Certificate from the 60 Plus Law Center in Lansing, Michigan.
Content Specialist at LegalShield, creating educational resources about legal and consumer protection topics. She focuses on making complex legal and financial concepts accessible to readers and has contributed to various educational articles on consumer rights and protections.
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