Estate Planning Financial Advisor: What They Do and When You Need One

Not tax or legal advice — your specific situation requires qualified professionals. This page explains how a financial advisor fits into estate planning.

The One Big Beautiful Bill Act (July 2025) permanently raised the federal estate tax exemption to $15 million per person — $30 million for a married couple.¹ For most households, this effectively ends federal estate tax exposure. But "most households" is not "all households," and federal estate tax is only part of the picture.

Twelve states and Washington D.C. impose their own estate or inheritance taxes, with thresholds starting as low as $1 million — far below the federal floor. A couple with a $4 million estate in Massachusetts owes zero federal estate tax and potentially hundreds of thousands in state estate tax. The planning question changed: it shifted from "how do we get under $15M?" to "how do we handle state taxes and the fifteen other things that have nothing to do with the exemption amount?"

That's where a financial advisor comes in — and why flat-fee is the right engagement model for estate planning.

Federal estate tax in 2026

The permanent exemption is $15 million per individual, indexed for inflation after 2026.¹ Married couples can combine exemptions: $30 million total through the portability election (IRC §2010(c)). A surviving spouse must file Form 706 within 9 months of the first spouse's death to claim the deceased spouse's unused exemption — or request a 5-year extension under Rev. Proc. 2022-32.²

The annual gift exclusion in 2026 is $19,000 per recipient ($38,000 for married couples using gift-splitting).¹ Gifts within this limit don't use any lifetime exemption. A couple with four adult children can transfer $152,000/year in 2026 ($38,000 × 4) without touching their lifetime exemption at all.

For estates above the exemption: the top federal estate tax rate is 40%. OBBBA did not change the rate — it only changed the exemption.

State estate taxes: the real planning frontier

For the mass of households with estates between $2M and $15M, state estate taxes are now the primary estate tax exposure. The 12 states plus D.C. that impose estate taxes vary significantly by threshold and rate:³

Five additional states (Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania) impose an inheritance tax — paid by heirs, not the estate, at rates that vary by relationship to the deceased. Maryland is the only state with both.

What a financial advisor does in estate planning

An estate planning attorney drafts the documents: will, revocable trust, powers of attorney, healthcare directives. That's essential, but documents alone don't constitute a plan. A financial advisor handles the things that happen outside the four corners of those documents:

Beneficiary designation audit

IRAs, 401(k)s, 403(b)s, life insurance policies, and annuities pass by beneficiary designation — not by your will. A will that says "leave everything to my children equally" doesn't touch the IRA that still names your ex-spouse as beneficiary from 1997. An advisor audits every account, compares designations against your current intent, and coordinates the corrections. This is one of the most common and most expensive estate planning mistakes: beneficiary designations that contradict the estate plan by decades.

Inherited IRA distribution planning

Under SECURE 2.0 (§107) and the final inherited IRA regulations (T.D. 10001, July 2024), most non-spouse beneficiaries must empty inherited IRAs within 10 years — and must take annual RMDs during those 10 years if the original owner was past their required beginning date (RBD).⁴ An advisor models the tax impact of different annual distribution amounts across the 10-year window, taking into account the beneficiary's own income, bracket, and other tax events. Stretching incorrectly — or taking the full amount in year 10 — can trigger a substantial tax bill that good planning avoids.

Portability election timing

When the first spouse dies, the surviving spouse has 9 months to file Form 706 and elect to carry over the deceased spouse's unused exemption amount (DSUE). Rev. Proc. 2022-32 extended this to 5 years for estates that weren't otherwise required to file.² With the exemption at $15M, the DSUE is worth up to $15M — potentially $6M in estate tax savings at a 40% rate. Missing the deadline is a permanent loss. An advisor tracks the timeline and coordinates the filing with the estate attorney and CPA.

Annual gifting strategy

The $19,000/person annual exclusion ($38,000 for couples gift-splitting) is the most tax-efficient wealth transfer tool available because it uses no lifetime exemption. An advisor builds and executes a systematic gifting plan: direct gifts to children and grandchildren, 529 superfunding ($95,000 lump sum now, covering 5 years of exclusions, per §529(c)(2)(B)), gifts to irrevocable trusts, and direct payment of medical and educational expenses (which are unlimited and exempt from gift tax when paid directly to the institution).¹

Charitable giving coordination

For donors with charitable intent, the tax tools available are significant: Qualified Charitable Distributions (QCDs) from IRAs up to $111,000/year in 2026 (excludable from income, counts toward RMD), Donor-Advised Funds for bunching deductions, Charitable Remainder Trusts for converting appreciated assets to income streams, and the OBBBA-enhanced QSBS exclusion ($15M, tiered at 50/75/100% for 3/4/5-year holding) for business-owner exits with charitable intent. An advisor evaluates these tools against your tax situation and estate goals — an attorney can draft the trust documents, but the planning requires financial modeling.

Step-up in basis planning

Assets held at death receive a step-up in cost basis to fair market value — meaning unrealized gains are eliminated at death, not taxed. An advisor identifies which appreciated assets should be held (to get the step-up) versus given during life (no step-up, but transfers assets now). This is particularly relevant for low-basis concentrated positions, real estate, and closely held business interests. The decision to gift versus hold involves trading the estate tax savings against the capital gain the recipient will eventually pay — the math differs significantly by asset, basis, and holding period.

Why flat-fee is the right model for estate planning

Estate planning is fundamentally a planning engagement — a defined scope of work with a beginning and end, not ongoing portfolio management. The appropriate structure is either hourly or project-based: you hire an advisor to build the estate plan, not to manage your assets.

AUM advisors have a structural conflict in estate planning: the strategies that are best for your estate — systematic gifting, irrevocable trust transfers, charitable remainder trusts, early Roth conversions — all reduce the assets under their management. An AUM advisor managing $5M at 1% earns $50,000/year. A successful gifting and trust strategy that moves $2M out of their management reduces their fee by $20,000/year. Fiduciary duty requires them to give you unbiased advice, but the financial incentive is structurally against the strategies that reduce AUM.

A flat-fee advisor charging $6,000 for an estate planning engagement earns the same whether they recommend an aggressive gifting strategy or suggest you hold everything. The planning conversation is conflict-free because the compensation isn't tied to what you do with the assets.

Typical cost for estate planning financial advice

• One-time project engagement: $2,500–$8,000 for a comprehensive estate planning financial review — beneficiary audit, gifting analysis, portability review, inherited IRA modeling, charitable strategy
• Hourly: $300–$500/hr for targeted questions — e.g., portability election timing or 10-year inherited IRA distribution modeling
• Annual retainer: $4,000–$12,000/year if you want ongoing coordination as the estate evolves

Compare this to an AUM advisor at 1% on a $5M estate: $50,000/year, every year, regardless of whether any estate planning work happens in a given year.

When to hire an estate planning financial advisor

• Estate worth $2M+ in a state with estate tax. The state tax exposure is real and addressable. An advisor quantifies it and models strategies to reduce it.
• Estate worth $5M+ anywhere. At this level, gifting, trust structures, and charitable strategies become economically significant. Don't wait for a taxable event to start planning.
• Spouse death. Portability election deadline is 9 months (5-year extension available). Inherited IRA elections for surviving spouses have their own timing rules. These deadlines are unforgiving.
• Inherited a large IRA or estate. 10-year distribution rules for inherited IRAs require an annual withdrawal plan across the window. The tax consequences of getting this wrong are real.
• Business sale, equity liquidity event, or inheritance. Sudden wealth changes the estate picture. What was below the state threshold is now above it. Gifting capacity is high. A plan built before the event avoids tax-inefficient decisions made in a hurry afterward.
• Beneficiary designations haven't been reviewed in 10+ years. This applies to almost everyone. Most people set IRA and life insurance beneficiary designations at account opening and never revisit them. Divorces, deaths, births, and changed relationships make old designations wrong.