Definition

The federal estate tax applies only to estates above a high exemption threshold, so it affects a small share of households, though some states impose their own estate or inheritance taxes at lower thresholds. Married couples can combine exemptions. Most estate planning for typical households focuses on avoiding probate rather than estate tax.

1. Revocable Living Trust

   A trust you control during life that passes assets to heirs without probate.
2. Step-Up in Basis

   A reset of an inherited asset's cost basis to its value at the owner's death.
3. Whole Life Insurance

   Permanent life insurance that lasts your whole life and builds cash value.