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Planning Your Estate as a Married Couple Under the Estate Exemption Limit

Planning Your Estate as a Married Couple Under the Estate Exemption Limit

April 03, 2024

Estate planning is a crucial step for securing your financial legacy, regardless of the size of your estate. Even if your net worth falls under the federal estate exemption limit—which is $13.61 million for individuals and $27.22 million for married couples in 2024—meaning you don’t need to pay an estate tax of a up to 40% on that estates that are over the exemption limit, it's still important to have a plan in place. This ensures your assets are distributed according to your wishes and can help your loved ones avoid unnecessary stress and confusion. Here's a guide on estate planning for those with a net worth under the federal exemption limit.

Understanding the Basics of Estate Planning

Estate planning involves arranging the management and disposal of your estate during your life and after your death. It encompasses the drafting of wills, trusts, health care directives, and powers of attorney. The aim is to ensure your assets are distributed to your intended beneficiaries, your healthcare wishes are respected, and your financial affairs are managed according to your desires if you become incapacitated.

Why It's Important

Even if you do not owe estate taxes due to the high federal exemption limit, there are several reasons why estate planning is still essential:

  • Probate Avoidance: Having a proper estate plan can help your heirs avoid the lengthy and costly probate process.
  • Incapacity Planning: Estate plans include documents like durable power of attorney and healthcare directives that become crucial if you're unable to make decisions for yourself.
  • Guardianship: If you have children under the age of 18, naming a guardian in your will is vital to ensure they are cared for by someone you trust in the event of your untimely death.
  • Asset Distribution: Without an estate plan, state laws determine how your assets are distributed, which might not align with your wishes.

Tax and Financial Planning

To further enhance the effectiveness of estate planning, incorporating tax and financial planning strategies is crucial. These strategies not only aim to minimize the tax burden on the estate and its beneficiaries but also seek to maximize the value of the assets that will be transferred to your heirs. Let's explore some of the most used strategies.

Annual Gift Tax Exemption

Take advantage of the annual federal gift tax exclusion each year. As of 2024, the IRS allows individuals to give up to $18,000 per year ($36,000 for married couples) to an unlimited number of people without diminishing the individual’s $13.61 million unified federal gift and estate tax exemption. These gifted funds can be used to start an investment account to help build up the assets of your loved ones, providing them with a financial head-start and the opportunity to grow their wealth over time.

Step-Up Basis

The concept of a step-up basis is particularly beneficial for estates that include appreciated assets, such as stocks and real estate assets. Upon the death of the asset owner, the basis of the asset is stepped up to its current market value. This adjustment can significantly reduce the capital gain tax when the asset is sold by the heirs since the gain will be calculated based on the value at the time of the owner's death rather than the original purchase price. Including assets likely to appreciate in your estate plan can be a powerful way to pass on wealth more efficiently.

Life Insurance

Incorporating life insurance into your estate plan can provide several benefits. Life insurance proceeds are generally income tax-free to the beneficiary. This makes life insurance a powerful tool for providing liquidity to your estate, covering debts, estate tax (if any), and other expenses without the need to sell off other assets. Furthermore, life insurance can be used to equalize inheritances among heirs or to leave a legacy to a charity.


Estate planning is not just for the wealthy; it's a vital tool for anyone who wants to ensure their financial affairs are handled according to their wishes. By integrating these tax and financial planning strategies into your estate planning, you can achieve a more comprehensive approach that maximizes the value passed on to your heirs. Each strategy offers unique benefits and should be considered in the context of your overall financial situation and estate planning goals. Consulting with financial and legal professionals can help you navigate these options and tailor an estate plan that best suits your needs and those of your beneficiaries.