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The goal of estate planning is to avoid taxes and probate while transferring assets to heirs.

The goal of estate planning is to avoid taxes and probate while transferring assets to heirs.

Three taxes to worry about:

• Estate Taxes
• Inheritance Taxes
• Gift Taxes

For a hypothetical estate owner with less than $1 million, taxes do not apply.

• no estate tax
• no inheritance tax
• no gift tax

Not an issue.
US federal estate tax exemption in 2025 is $13.99 million.
Some states have an estate tax, which applies to the owner of the estate (the deceased).

Not an issue.
There is no US federal inheritance tax.
Six states have an inheritance tax, but that would apply only if the owner lived in one of those states.

No tax, but the giver must file Form 709 to the IRS for any gift over $19,000, as of 2025.
The US federal lifetime gift tax exemption in 2025 is $13.99 million.
Only one state has a gift tax, it has a high exemption, and it applies only when the giver lives there.

No such thing.
All responsibility for filing and paying taxes is on the giver.
https://money.usnews.com/money/personal-finance/taxes/articles/gift-tax-tax-rules-to-know-if-you-give-or-receive-cash

Federal: $13.99 million exemption
California: none
Kansas: none
Washington: $2 million exemption
Six states have estate tax, the lowest exemption is $1 million.
If the deceased lives in a state, his estate may be susceptible to the estate taxes of that state.

Thailand: none

https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
The federal exemption amount is set every year by the IRS.
2025: $13.99 million
2024: $13.16 million
2016: $5 million
Add “lifetime” gifts since 1977 to the estate.
No filing required.

16 states have estate tax, lowest exemption $675,000

Federal: $14,000 exemption per recipient per year. No filing required if under the exemption.
California: none
Kansas: none
Washington: none
Thailand: none

Federal: none
California: none
Kansas: none
Washington: none
Thailand: 100,000,000 THB (3,000,000 USD) exemption

six states have inheritance tax

Federal: none
California: none
Kansas: none
Washington: none
Thailand: 10,000,000 THB (300,000 USD) exemption per person per year

The IRS might try to collect from the recipient, only if the gifter had failed to pay the gift tax.

Cheatsheet: federal and state: gift, estate, inheritance taxes
https://www.wealthspire.com/guides-whitepapers/federal-state-estate-gift-tax/

Chart of state taxes: gift, estate, inheritance, etc
https://www.thebalancemoney.com/state-tax-chart-3505461

A procedure proving the legal validity of a will. It can take a year or more. It requires a lawyer, time and money.

How to avoid probate: no Will. Instead, use:

• Gifts
• Trusts
• Beneficiaries

Gifts given before death do not go through probate because they are not part of the estate.

A trust can be used to avoid probate as well as taxes, but it requires a lawyer, documents, and expenses, not just to set it up, but then to administer it throughout its life.

Specifying beneficiaries on bank and investment accounts is free and the holdings pass to the beneficiaries immediately on death without going through probate.

• If you have less than $1 million, don’t bother with a trust.
• Give everything away as soon as you are ready.
• Specify beneficiaries on all accounts, for the event of an untimely death.

Beneficiaries can be added to bank accounts, brokerage accounts, IRAs, 401Ks, and other types of financial accounts.

Transfer on Death TOD beneficiary - account ownership transfers to the beneficiary
Payable on Death POD beneficiary - account assets transfer to the the beneficiary
https://www.gundersonlawgroup.com/estate-planning/difference-between-transfer-on-death-and-payable-on-death-designation/

What happens if one beneficiary dies before the owner, and the others survive?
Beneficiaries are designated in one of two ways:

• per capita - the deceased beneficiary’s share is redistributed equally among the surviving beneficiaries
• per stirpes - (or by right of representation), the deceased beneficiary’s share passes to his heirs

Deceased’s instructions on how he wants his estate divided up among his heirs.

Soon-to-be-deceased’s Instructions for end-of-life medical procedures.
Has no power after death.

income tax for trustees?  at funding of the trust?  at distribution to trustees?  
three trustees: myself, one brother, one sister  
unanimous consent for investment and distribution decisions  
additional trustees (children)?  unanimous consent  
none spent on mom, unilateral, covered by unanimous consent requirement

Trustee.
Co-trustee.
Successor trustee.
Alternative trustee.
Beneficiary.
Instructions.

IRS treats the trust as private personal property of the trustee.

Co-trustees. For example, “the James and Ima Hogg Trust,” instead of just one name; both spouses are co-trustees.

Transfer at Death
“…for example, she would put it in a trust and name him co-trustee or successor trustee. Then, when she dies, he becomes sole trustee, and acting in that capacity, transfers the trust property to the beneficiary–himself. Since the property does not have to go through probate, there’s no break in continuity.”

Will expresses the wishes of the deceased.
Living Trust contains money.
Both Trust and Will can be used to avoid probate if done properly.

Must pay gift tax on money placed into a trust.
Living Trust avoids probate, but not estate taxes.

Bank accounts and investment accounts allow you to name a beneficiary. Upon your death, the account passes to the beneficiary without probate.

How and when does the bank know to distribute the money?

I want to specify that the money goes to the beneficiaries at age 80 or death or incapacity, whichever comes first. Is this possible with a pay-on-death account?-NO. Is it possible with a living trust?- YES Is it possible with a will?-NO

topics
probate
inheritance tax
estate tax
gift tax
will
trust
income tax
State: California, Kansas, Washington
USA federal
Thailand

Will : instructions
Trust : assets

Living Will : instructions to be followed while owner is living
Living Trust : a trust where the still-living owner is a trustee. A living trust can be revocable or irrevocable.

Will : Probate
Trust : No Probate

A Will must go through Probate to be interpreted and executed. If the disposition of assets is described in a Will, the assets remain frozen until the Probate is concluded.

A Trust has already distributed ownership of assets among trustees. So Probate is irrelevant.

living will in USA

• requirements differ by state
• must be witnessed
• instructions to doctor only
• no power after death

no inheritance tax in Thailand
https://www.thaivisa.com/forum/topic/618983-the-importance-of-preparing-a-will-in-thailand/

living will in Thailand

• instituted by law in 2007 and 2010
• may or may not be honored arbitrarily by hospital and/or doctor

• In America, taxes are paid by the deceased and gifter, not by the heirs and recipients. The reverse is true in Thailand.
• A will contains instructions. A trust contains money and property.
• A living will contains instructions for before death. A will contains instructions for after death.
• A will is a matter of public record. A trust is private.
• A will goes through probate. A trust does not. The trust does not die, only the trustee dies. Property was transferred to the trust prior to death.

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How best to leave my stuff behind for my heirs.

Qualified charitable distributions allow eligible IRA owners up to $100,000 in tax-free gifts to charity.
https://www.irs.gov/newsroom/qualified-charitable-distributions-allow-eligible-ira-owners-up-to-100000-in-tax-free-gifts-to-charity

When an IRA distributes to its beneficiaries, the full amount will be taxed as ordinary income to the beneficiary in that year.
There is an exception: when the beneficiary is a spouse or adult child of the IRA owner, the distribution may be taken over a 10-year RMD schedule.
This exception does not apply to me.
How many beneficiaries do Schwab and IBKR allow?

Beneficiary designation:

• per capita - the deceased beneficiary’s share is usually redistributed equally among the surviving beneficiaries
• per stirpes - (or by right of representation), the deceased beneficiary’s share would typically pass to their heirs

Beneficiaries are a feature of US accounts, but generally not available on international accounts because of additional rules in the host country. At least, the Charles Schwab International account does not accept beneficiaries.

How to give fund to heirs?

• beneficiary of deferred account at death
• beneficiary of taxable account
• cash gift while alive

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I choose the cash gift option because I know my affairs are in order and this will give me peace of mind.

How to leave funds for heirs? IRA or taxable account
In a taxable account, dividends and capital gains are taxed each year.
In an IRA, investments grow without being taxed annually.

10 year plan, gift all but 100K to heirs
maximize total cumulative gift

Two account groups

• deferred account
  • IRA rollover, funded from 401K rollover and IRA transfers
  • distribution taxed as ordinary income, per 1099-R
  • reported on 1040
• taxable account
  • ETFs. (mutual funds not available outside USA)
  • taxed annually per 1099-DIV
  • taxed at sell per 1099-B, showing proceeds and cost basis (new since 2012)
  • capital gains reported on form 8949 → schedule D → 1040

deferred account, taxed as ordinary income at distribution, per 1099-R
taxable account, taxed annually per 1099-DIV, and at sell per 1099-B, schd D and form 8949
cash gift

IRS 1040 Tax Reporting
1099-DIV dividends 1a) total ordinary dividends, 1b) qualified dividends, 2a) total capital gains (1b is a subset of 1a, qualified divided are taxed as capital gains),
1099-INT savings account interest
1099-R redemptions (distributions) from an IRA
SSA-1099 social security payout
1099-B proceeds and cost basis reported by broker for sale of mutual funds or ETFs

Inheritance is not taxed until it reaches amounts above $12M. $6M after 2026.

Trust and Will - estate planning

This attorney -
https://www.minterpollaklawfirm.com/blog/power-of-attorney/ -

says that everyone should have a power of attorney in place, so that should I become incapacitated, the appointed can step in and take care of things.

I have not given this any thought, but maybe I should.