Estate tax planning refers to the act of creating a contingency for minimizing the amount of financial liability owed to state or federal governments upon the death of an individual. Estate tax planning is not necessary for everyone, but for those with high asset value, it can be a worthwhile investment of time and effort. 

Unlike typical tax planning which occurs periodically or annually, estate tax planning is in preparation for a single taxation event. An additional difference is that estate tax planning prepares for an event that will occur after the filer has died, preventing any off-the-cuff adjustments when the time comes to execute the plan.

While state estate tax levels vary from state to state, with some states even having no state estate tax, the federal estate tax exemption for 2023 is $12.92 million for single people and $25.84 million for couples. This means that anyone with less than that amount in assets will be exempt from estate taxes and for those who are not exempt, the first $12-25 million of assets will not be considered when calculating estate tax.

One of the most common ways to reduce estate taxes owed is to take advantage of deductions, exemptions, and auxiliary financial structures. Some exemptions may involve leaving assets to spouses or children in ways that make those assets non-taxable. Examples of auxiliary financial structures include trusts, in which the grantor disavows any claim to assets and instead puts them in the care of a fiduciary with the ultimate goal of passing the assets to the beneficiary upon the death of the grantor.

In the event that someone passes without an estate tax plan,  even if they have a will, if they have a sufficiently large valuation of assets then the government will take a portion of the assets before they can be allocated to the beneficiaries. If a will has been created then certain specific assets can be set aside to not be seized, but if the estate tax bill is high enough, even some of these protected assets may not be safe when the bill comes due. Ideally, individuals with high asset values will consult with a tax law attorney in order to fully explore their options of circumventing undue estate taxes.