Avoid These Estate Tax Errors That Could Ruin Your Legacy Plans
Written by
G. Brian Davis
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Amen Oyiboke
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No parent wants to leave half their estate to Uncle Sam rather than their children or grandchildren.
Watch out for these estate tax errors that can leave your heirs with less.
Waiting Until You Die
Every year, you can give money tax-free to anyone you like. The limit changes each year, but in 2026 it’s $19,000 per recipient.
Married couples could give $38,000 to each of their children or grandchildren, tax-free.
The gift doesn’t apply toward your lifetime estate tax exemption, so start gifting today if you worry about crossing the exemption threshold when you kick the bucket.
Gifting Appreciated Assets While Alive
One caveat: Give cash while you’re alive. If you gift stocks or other appreciated assets, the recipient takes over your original cost basis.
In other words, they’ll owe full capital gains taxes when they sell.
Likewise, if you sell the assets before gifting, you pay the capital gains. But if you leave these appreciated assets in your estate, the cost basis resets upon your death.
Skipping the 706 Form
The federal estate tax exemption is higher than it’s ever been, at $15 million per person. But many tax experts see that as the first tax to go up in future tax changes.
However, when one spouse dies, they can transfer their current tax exemption to their surviving spouse.
“While the estate tax exemption may change in the future, if you file a 706 form at the death of a spouse, you can ‘port’ the unused exemption amount to the surviving spouse to add to their exemption,” said John Sauter, estate planning attorney with Cordell & Cordell.
Ignoring State Death Taxes
Sure, the federal estate tax exemption is high — but some states start taxing at much lower thresholds.
“Some states charge multiple taxes, estate tax and an inheritance tax,” said Sauter. It gets even more complicated as some states charge an inheritance tax based on where either the deceased person or the heir lives.
Ignoring New Laws and Limits
Tax laws, exemptions, limits and other rules change all the time. Your estate plan must evolve with them to take full advantage of the new rules.
“Plans written years ago may leave your heirs with unnecessarily high taxes today, given changes under new laws like the SECURE Act and One Big Beautiful Bill Act,” said Tami Amici, fiduciary tax services manager at Tompkins Financial Advisors.
Outdated Beneficiary Forms
For some accounts and assets, the beneficiary form takes precedence over your will. “Retirement accounts, life insurance and transfer-on-death assets pass by contract,” said Amici.
Forget to update that form after your wishes change, and the wrong person inherits your account, which can trigger unexpected taxes.
Failing To Use Trusts Strategically
Wealthier and more complex estates can use trusts to minimize the tax exposure, even beyond the estate tax exemption.
Amici lists a few specific trusts that could help: “Bypass trusts, QTIP trusts, irrevocable life insurance trusts, GRATs and SLATs can reduce taxes depending on your goals and assets.”
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