The main intention behind the estate tax planning is to give legal tax amount and avoid the probate court involvement. This tax planning involves with various tax planning tools like the will, estate planning trusts, recipient designation, various types of property ownership, powers of appointment, joint tenancy that have survivorship rights, tenancy in common, tenancy by the entirety, gifting, and powers of attorney, specifically the durable financial power of attorney and the durable medical power of attorney.
The planning of the estate is mainly associated with the utilization, preservation and relocation the real estate property and asset of that particular person. It consists of two elements. The first element includes reducing the gift or estate tax penalty when the property or asset is relocated to his successor through his will during his lifetime or at death. The second element contains the necessities to take care of the decedent's immediate family members and spouse.
Both of these above maintained elements may be extremely intricate, interconnected and often inverse in their application. For instance, if in any estate tax planning will, the distribution of the wealth always favors his/her children or grandchildren and less for the existing spouse, then it may cause unfavorable penalty of estate tax. This kind of circular shows the fundamentals of estate planning.
As far as the definition of the estate tax in USA is concerned, the federal estate tax is a tax that is charged on the property belongs to the decedent at death. The tax is paid by the estate to get the legal license of owning the property. The evaluation of the tax is based on the fair market value of the real estate property at the date of the death or on the upcoming valuation date.