4 Estate Tax Planning Strategies: How to Protect Your Legacy

Admin • December 22, 2023

You’ve worked hard to preserve and grow your wealth through the years, and you aspire to transfer your financial achievements as a legacy to your family and heirs. Unfortunately, estate taxes can significantly impact the wealth you intend to pass on. 

Understanding these taxes and their importance in making estate decisions can lead to more deliberate and effective estate planning. And incorporating tax strategies into your planning efforts can help you secure and preserve your legacy for future generations to come.

Understanding Estate Taxes

Estate taxes are commonly referred to as the “death tax,” and are defined by the government as a tax on your right to transfer property at your death . Your property consists of everything you own, including cash and securities, real estate, trusts, insurance, annuities, any business interests, and other assets.

Tax laws change constantly, and the thresholds and exemptions that determine your tax liability shift accordingly. In general, estate taxes must be paid when your estate is worth more than the current year’s exemption. The 2023 federal estate tax exemption is $12.92 million per individual, or $25.84 million for married couples.

Also known as the lifetime estate and gift tax exemption, this amount will increase to $13.61 million for 2024, or $27.22 million for couples. This means that if your estate is valued less than the exemption limit at the time of your passing, your heirs won’t owe taxes on your estate.

Individual states can levy their own estate taxes in addition to federal taxes, and some states may also have an inheritance tax that the beneficiary must pay. It’s important to stay informed of the latest tax rules and regulations and how they can potentially affect your estate.

Estate taxes can have a substantial impact on the wealth that is passed down to beneficiaries. Without a carefully crafted estate plan, a significant portion of your assets may be taxed, diminishing the legacy that you’ve worked so hard to establish. 

4 Estate Tax Planning Strategies

Estate tax planning can be a complex process, involving a variety of strategies to help minimize the tax burden on your estate and make the most of your legacy.

Carefully reviewing your assets and liabilities is a foundational step in estate tax planning. Evaluate all your assets, including savings, investments, real estate, personal property, and business interests, as well as any existing debts and liabilities. Understanding the composition and value of your estate is important to accurately assess your potential tax liabilities.

A comprehensive overview of your estate helps lay the groundwork for your planning and allows you to make informed decisions on gifting, trusts, and other estate tax planning strategies.

1. Be Strategically Generous 

Strategic gifting during your lifetime is a powerful tool in estate tax planning; both the annual and lifetime gift exemptions can help reduce the taxable value of your estate. Gift tax applies to the transfer, by gift, of any type of property, and is generally only paid on the amount that exceeds the lifetime exemption.

The annual gift exemption allows you to gift up to a certain amount each year to any individual; taking advantage of this exemption enables you to transfer your wealth gradually, without any tax implications. The annual gift exclusion before taxes are triggered in 2023 is $17,000 per person, or $34,000 for a married couple (in 2024, this amount will increase to $18,000 for individuals and $38,000 for married couples.) This exclusion is per gift, per recipient , not the total amount of all your gifts: for every family member or individual you wish to gift, you can give each one an amount up to the annual exclusion.  

If you gift over the annual gift exclusion, the excess amount is added to your lifetime estate and gift exemption. Once you’ve exceeded your lifetime exemption, you may be subject to taxes. 

The benefit of the lifetime exemption is that it enables you to gift larger amounts and assist with costly expenses like higher education or the purchase of a home, without incurring tax liability.

2. Establish Trusts

Trusts are another key component of estate tax planning strategies, as they offer unique features that help minimize the tax burden on your heirs. There are various types of trusts available, and understanding their distinctions and how they may complement your individual objectives is an essential part of estate planning.

In general, irrevocable trusts can offer asset protection by removing designated assets from your taxable estate. Your assets are held and distributed according to specific terms in your irrevocable trust, essentially shielding them from estate taxes. Irrevocable trusts include irrevocable life insurance trusts (ILITs), Grantor-retained annuity trusts (GRATs), spousal lifetime access trusts (SLATs), and qualified personal residence trusts (QPRTs).

Be mindful that irrevocable trusts are irrevocable – once set up, making any changes to the trust can be a complicated process. Irrevocable trusts also require you to give up control of those assets that are transferred into the trust, so it’s important to carefully consider the way you want to structure your trust.

Revocable trusts offer more flexibility and control during your lifetime, but any assets within these trusts are still considered part of your taxable estate. While there are no tax advantages like with irrevocable trusts, revocable trusts establish a seamless transfer of assets upon your passing, and simplify the distribution process by allowing your heirs to avoid probate.

3. Consider a Family Limited Partnerships

Creating a family limited partnership (FLP) can help minimize estate tax for family-owned businesses or assets by establishing a general partnership with your heirs and family as limited partners. FLPs allow you to transfer your assets while still retaining control over them, but your partners will own a portion of these assets. An FLP will decrease the size of your estate and can help preserve family wealth.

4. Offset Your Taxes with Charitable Giving

Charitable giving allows you to give back to society, and make an impactful contribution to your community or to causes that are meaningful to you. Through your charitable giving, you can also benefit from valuable tax advantages, as your charitable donations can reduce your taxable estate.

As part of your estate tax planning strategy, you can consider establishing donor-advised funds (DAFs), charitable trusts, or private foundations. These charitable giving strategies can further enhance the tax efficiency of donating to charitable organizations, and help you create a lasting legacy of goodwill and making a difference.

Estate Planning with Five Pine Wealth Management

Estate planning is an integral part of your financial planning, helping to protect and preserve your wealth for future generations. Carefully implementing estate tax planning strategies that are right for your objectives can ensure that your legacy endures for many more years.

Working with a financial professional can help you navigate the changing landscape of tax laws and the complexities of estate planning. At Five Pine Wealth Management , we are fiduciary advisors who work alongside you to develop a holistic financial and estate plan that is tailored to your needs, risk tolerance, and goals. We will always have your best interests in mind with every recommendation we make. To see if we can help you, please email us or call: 877.333.1015.

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What High Earners Overlook After Maxing Out Their 401(k)

January 26, 2026
Key Takeaways High earners maxing out 401(k)s at $24,500 are only saving about 8% of a $300,000 income in their primary retirement account. The mega backdoor Roth strategy can increase total 401(k) contributions to $72,000 annually with tax-free growth. A comprehensive approach can create nearly $3 million in additional retirement wealth over 20 years. It's 2026. You're checking all the boxes. You're earning upwards of $300,000 annually, and you're maxing out your 401(k) every year. You've reached the $24,500 contribution limit and feel confident about securing your financial future. Then you realize $24,500 represents less than 8% of your income. Over 20 years, this gap adds up to millions in lost opportunity. Thankfully, you're not stuck with the basic 401(k) playbook. There are sophisticated strategies beyond your contribution limit. 5 Strategic Moves for High Earners with Maxed-Out 401(k)s Here are five sophisticated strategies that can help you build wealth beyond your basic 401(k) contributions. All projections assume a 7% average annual return and are estimates for illustrative purposes. 1. Mega Backdoor Roth Contributions If your employer's 401(k) plan allows after-tax contributions, this could be your biggest opportunity. With employee contributions, employer match, and after-tax contributions, the combined 401(k) limit for 2026 is $72,000 ($80,000 if you're 50 or older). The mega backdoor Roth works because you immediately convert those after-tax contributions into a Roth account, where they grow tax-free forever. The catch: Not all employers offer this option. You need a plan that permits after-tax contributions and in-service Roth conversions. The impact: The available space for after-tax contributions depends on your employer match. With a typical employer match of 3-6% (roughly $10,000-$21,000 on a $350,000 salary), you could contribute approximately $26,500-$37,000 annually. At 7% average returns over 20 years, this creates approximately $1.1-$1.5 million in additional tax-free retirement savings. 2. Donor-Advised Funds for Charitable Giving If you're charitably inclined, donor-advised funds (DAFs) offer a way to bunch several years of charitable contributions into one tax year, maximizing your itemized deductions while still spreading your giving over time. You get an immediate tax deduction for the full contribution, but you can recommend grants to charities over many years. The funds grow tax-free in the meantime. The catch: Once you contribute to a DAF, the money is irrevocably committed to charity. You can't get it back for personal use. The impact: Contributing $50,000 to a DAF in a high-income year (versus giving $10,000 annually) can create immediate federal tax savings of $15,000-$18,500 while still allowing you to support the same charities over five years. 3. Taxable Brokerage Accounts with Tax-Loss Harvesting Once you've maximized tax-advantaged accounts, strategic taxable investing becomes your next move. The key is working with a financial advisor who implements systematic tax-loss harvesting throughout the year. Tax-loss harvesting involves selling investments at a loss to offset capital gains elsewhere. Done strategically, this can save thousands in taxes annually. The catch: Long-term capital gain rates (0%, 15%, or 20%) are lower than ordinary income tax rates, but you're still paying taxes on gains. It's less tax-efficient than retirement accounts, but far better than ignoring tax optimization. The impact: For high earners in the 35-37% ordinary income brackets, the difference between long-term capital gains (20%) and ordinary rates is significant. Effective tax-loss harvesting on $50,000 in annual gains over 20 years could save $150,000+ in taxes. 4. Health Savings Account (HSA) Triple Tax Advantage HSAs offer a unique triple tax benefit: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. With 2026 contribution limits of $4,400 for individuals and $8,750 for families, this adds another powerful layer to your strategy. You can invest HSA funds just like an IRA and let them grow for decades. After age 65, you can withdraw the funds for any purpose, medical or otherwise. The catch: You must have a high-deductible health plan to qualify for an HSA. After age 65, non-medical withdrawals are taxed as ordinary income (like traditional IRA distributions), but you still benefit from the upfront deduction and decades of tax-free growth. The impact: Contributing the family maximum ($8,750) annually for 20 years at a 7% average annual return creates approximately $355,000-$360,000 in tax-advantaged savings. 5. Backdoor Roth IRA Contributions Not to be confused with mega backdoor Roth contributions! Even if your income exceeds the Roth IRA contribution limits, you can still fund a Roth through the backdoor method: make a non-deductible contribution to a traditional IRA, then immediately convert it to a Roth IRA. The catch: If you have existing traditional IRA balances, the pro-rata rule complicates things. You may want to consider rolling those funds into your 401(k) first if your plan allows. The impact: Contributing $7,000 annually through the backdoor Roth for 20 years at 7% average annual return creates approximately $285,000-$290,000 in tax-free retirement savings. What Compounding These Strategies Looks Like Over 20 Years Let’s look at approximate outcomes based on a 7% average annual return. 401(k) Only: Annual contribution: $24,500 Total after 20 years: ~$1M 401(k) + Mega Backdoor Roth: Annual contribution: $72,000 Total after 20 years: ~$3M Note: Mega backdoor Roth space varies based on your employer's match. These calculations assume you're maximizing the total annual limit. Comprehensive Approach (under age 50): Mega Backdoor Roth: ~$3.0M HSA: ~$350K-$360K Backdoor Roth IRA: ~$285K-$290K Strategic taxable investing with tax-loss harvesting Total retirement savings: ~$3.6M+, plus taxable investments Comprehensive Approach (ages 50-59): With higher contribution limits and catch-up contributions, total retirement savings can reach ~$4M+ over 20 years. Comprehensive Approach (ages 60–63 with enhanced catch-up contributions) Higher contribution limits during peak earning years allow for meaningful acceleration of retirement savings. The exact impact depends on timing, contribution duration, and existing balances. The Bottom Line The difference between stopping at your basic 401(k) and implementing a comprehensive strategy can approach $3 million or more in additional retirement wealth over time. Why Strategic Coordination Matters These aren't either/or decisions. The most effective approach coordinates multiple strategies while ensuring everything works together. At Five Pine Wealth Management , we help high-earning clients build comprehensive plans that go beyond the 401(k). We coordinate your employer benefits, tax strategies, and investment accounts to create a cohesive approach that maximizes your wealth-building potential. This requires working across several areas: Analyzing your employer's 401(k) plan for mega backdoor Roth opportunities Implementing systematic tax-loss harvesting in taxable accounts Coordinating Roth conversions and backdoor contributions Optimizing your HSA as a long-term retirement vehicle Ensuring charitable giving strategies align with your tax situation Maximizing catch-up contributions when you reach milestone ages As fiduciary advisors, we're legally obligated to act in your best interest. That means we're focused on strategies that serve your goals, not products that generate commissions. Ready to see what's possible beyond your 401(k)? Email us at info@fivepinewealth.com or call 877.333.1015 to schedule a conversation about your specific situation. Frequently Asked Questions (FAQs) Q: Does my employer's 401(k) plan automatically allow mega backdoor Roth contributions? A: No. You need a plan that permits after-tax contributions and in-service conversions to Roth. Check with your HR department. Q: How do I prioritize which investment strategies to use? A: Generally, maximize employer match first (it's free money), then fully fund your 401(k), explore Mega Backdoor Roth if available, max out your HSA, consider backdoor Roth IRA contributions, and then move to taxable accounts with tax-loss harvesting. We can help determine the right sequence for your circumstances.

The Portfolio Decisions That Matter 10 Years Before Retirement

December 22, 2025
Key Takeaways Your guaranteed income sources (pensions, Social Security) matter more than your age when deciding allocation. Retiring at 65 doesn't mean your timeline ends. You likely have 20-30 years of investing ahead. Think in time buckets: near-term stability, mid-term balance, long-term growth. You're 55 years old with over a million dollars saved for retirement. Your 401(k) statements arrive each month, and you find yourself questioning whether your current allocation still makes sense. Should you be moving everything to bonds? Keeping it all in stocks? Something in between? There's no single "correct" asset allocation for everyone in this position. What works for you depends on factors unique to your situation: your retirement income sources, spending needs, and risk tolerance. Let's look at what matters most as you approach this major life transition. Why Asset Allocation Changes as Retirement Approaches When you’re 30 or 40, your investment timeline stretches decades into the future. When you’re 55 and looking to retire at 65, that equation changes because you’re no longer just building wealth: you’re preparing to start spending it. You need enough growth to keep pace with inflation and fund decades of retirement, but you also need stability to avoid the need to sell investments during market downturns. At this point, asset allocation 10 years before retirement is more nuanced than a simple “more conservative” approach. Understanding Your Actual Time Horizon Hitting retirement age doesn't make your investment timeline shrink to zero. If you retire at 65 and live to 90, that's a 25-year investment horizon. Think about your money in buckets based on when you'll need it: Time Horizon Investment Approach Example Needs Short-Term (Years 1-5 of Retirement) Stable & accessible funds Monthly living expenses, healthcare costs, and early travel plans Medium-Term (Years 6-15) Moderate risk; balanced growth Home repairs, care and income replacement, and helping grandchildren with college Long-Term (Years 16+) Growth-oriented with a Long-term care expenses, decades-long timeline legacy planning, and extended longevity needs This bucket approach helps you think beyond simple stock-versus-bond percentages. Asset Allocation 10 Years Before Retirement: Starting Points While there's no one-size-fits-all answer, here are some reasonable starting frameworks: Conservative Approach (60% stocks / 40% bonds) : Makes sense if you have minimal guaranteed income or plan to begin drawing heavily from your portfolio upon retirement. Moderate Approach (70% stocks / 30% bonds) : Works well for those with some guaranteed income sources, moderate risk tolerance, and a flexible withdrawal strategy. Growth-Oriented Approach (80% stocks / 20% bonds) : Can be appropriate if you have substantial guaranteed income covering basic expenses and the flexibility to reduce spending temporarily as needed. Remember, these are starting points for discussion, not recommendations. 3 Steps to Evaluate Your Current Allocation Ready to see if your current allocation still makes sense? Here's how to start: Step 1: Calculate your current stock/bond split. Pull your recent statements and add up everything in stocks (including mutual funds and ETFs) versus bonds. Divide each by your total portfolio to get percentages. Step 2: List your guaranteed retirement income. Write down income sources that aren't portfolio-dependent: Social Security (estimate at ssa.gov), pensions, annuities, rental income, or planned part-time work. Total the monthly amount. Step 3: Calculate your coverage gap. Estimate monthly retirement expenses, then subtract your guaranteed income. If guaranteed income covers 70-80%+ of expenses, you can be more growth-oriented. Under 50% coverage means you'll need a more balanced approach. When to Adjust Your Allocation Here are specific triggers that signal it's time to review and potentially adjust: Your allocation has drifted more than 5% from target. If you started at 70/30 stocks to bonds and market movements have pushed you to 77/23, it's time to rebalance back to your target. Your retirement timeline changes significantly. Planning to retire at 60 instead of 65? That's a trigger. Every two years of timeline shift warrants a fresh look at your allocation. Major health changes occur. A serious diagnosis that changes your life expectancy or healthcare costs should prompt an allocation review. You gain or lose a guaranteed income source. Inheriting a pension through remarriage, losing expected Social Security benefits through divorce, or discovering your pension is underfunded. Market volatility affects your sleep. If you're checking your portfolio daily and feeling genuine anxiety about normal market movements, your allocation might be too aggressive for your comfort, and that's a valid reason to adjust. Beyond Stocks and Bonds Modern retirement planning involves more than just deciding your stock-to-bond ratio. Consider international diversification (20-30% of your stock allocation), real estate exposure through REITs, cash reserves covering 1-2 years of spending, and income-producing investments such as dividend-paying stocks. The Biggest Mistake: Becoming Too Conservative Too Soon Moving everything to bonds at 55 might feel safer, but it creates two significant problems. First, you're almost guaranteeing that inflation will outpace your returns over a 30-year retirement. Second, you're missing a decade of potential growth during your peak earning and saving years. The difference between 60% and 80% stock allocation over 10 years can mean hundreds of thousands of dollars in portfolio value. Being too conservative can be just as risky as being too aggressive, just in different ways. Questions to Ask Yourself As you think about your asset allocation for the next 10 years: What percentage of my retirement spending will be covered by Social Security, pensions, or other guaranteed income? How flexible is my retirement budget? Could I reduce spending by 10-20% during a market downturn? What's my emotional reaction to seeing my portfolio drop 20% or more? Do I plan to leave money to heirs, or is my goal to spend most of it during retirement? Your honest answers to these questions matter more than your age or any generic allocation rule. Work With Professionals Who Understand Your Complete Picture At Five Pine Wealth Management, we help clients work through these decisions by looking at their complete financial picture. We stress-test different allocation strategies against various market scenarios, coordinate withdrawal strategies with tax planning, and help clients understand the trade-offs between different approaches. If you're within 10 years of retirement and wondering whether your current allocation still makes sense, let's talk. Email us at info@fivepinewealth.com or call 877.333.1015 to schedule a conversation. Frequently Asked Questions (FAQs) Q: What is the rule of thumb for asset allocation by age? A: Traditional rules like "subtract your age from 100" are oversimplified. Your allocation should be based on your guaranteed income sources, spending flexibility, and risk tolerance; not just your age. Q: Should I move my 401(k) to bonds before retirement? A: Not entirely. You still need growth to outpace inflation. Gradually shift toward a balanced allocation (60-80% stocks, depending on your situation) and keep 1-2 years of expenses in stable investments. Q: What's the difference between stocks and bonds in a retirement portfolio?  A: Stocks provide growth potential to keep pace with inflation but come with volatility. Bonds offer stability and income but typically don't grow as much.