Inheritance planning has several aspects. First, heirs must be chosen. For many people, this is the easiest part. They simply name their surviving spouse and/or children as the beneficiaries of their estate. However, estate planning also provides a perfect opportunity to recognize other people and organizations that hold special meaning. Second, the method for transferring assets must be determined. Trusts are the most common tool for accomplishing this. One trust might be set up to transfer property to a spouse while a separate, more tightly controlled trust might be created to hold any funds that are being distributed to children or young adults.

Third, the tax implications for each beneficiary of an inheritance should be examined. In states that feature an inheritance tax, the gifts made to each beneficiary should take into account the portion that will actually go to paying this revenue tax. An irrevocable trust can be used to transfer assets to a charitable organization while reducing the total asset value that is used to calculate estate taxes. An AB trust creates an opportunity to double the amount of assets that may be transferred tax free to the surviving spouse. It can also defer estate taxes until both spouses are deceased.