Taxes may not be the first issue that comes to mind when you begin creating an estate plan, but tax considerations can influence each of the decisions you make within your plan and ultimately determine how much of your wealth reaches the people and organizations you intend to benefit. While New Hampshire residents have an important advantage because the state does not impose its own estate tax or inheritance tax, federal estate and gift taxes can still affect larger estates, while capital gains taxes, income taxes, retirement account taxation, and the tax consequences of lifetime gifts can influence families at considerably lower levels of wealth. Moreover, the most obvious strategy for reducing one type of tax is not necessarily the strategy that produces the best overall result. Giving away appreciated property during your lifetime, for example, may reduce the value of your future estate but potentially leave your beneficiary with a substantial capital gains tax burden. Likewise, an estate consisting primarily of valuable real estate or a closely held business may have considerable wealth on paper but insufficient cash to satisfy taxes and other expenses after your death. Effective tax planning therefore requires looking beyond a single tax or exemption. To help your overall plan succeed, the attorneys at Legacy Care Law Firm discuss tax planning for your New Hampshire estate plan.
Do Not Assume Estate Tax Planning Is Only for the Extremely Wealthy
One of the easiest estate planning mistakes to make is evaluating potential estate-tax exposure based solely on the value of your assets today. Your estate may grow significantly between the time you create your estate plan and your death. A home purchased decades ago may appreciate substantially. Retirement accounts and investment portfolios can increase in value, while a successful closely held business may eventually become one of your most valuable assets. Life insurance can also be relevant when calculating the value of an estate for federal estate-tax purposes, depending on ownership and other circumstances. Consequently, someone who does not appear to have a federal estate-tax problem today should not automatically assume the issue will never become relevant.
Federal estate and gift tax laws can also change. Exemption amounts, tax rates, and planning opportunities are controlled by federal law and can be modified by Congress. An estate plan designed around a particular exemption amount may remain in place for decades, during which the tax environment could look considerably different. This is one reason flexibility is valuable in long-term estate planning. Depending on your wealth and objectives, your attorney may discuss marital planning, trust provisions, charitable strategies, lifetime transfers, disclaimer planning, or other techniques that can respond to changing circumstances.
Understand New Hampshire’s State Tax Landscape
Tax planning for a New Hampshire resident differs significantly from planning in a state that imposes its own estate or inheritance tax. New Hampshire does not currently impose a separate estate tax on property transferred at death, nor does it impose a state inheritance tax simply because a beneficiary receives property from an estate. As a result, New Hampshire residents do not face the additional state estate-tax system that exists in some jurisdictions. This distinction can be particularly important for someone relocating to New Hampshire from another state. An estate plan drafted years earlier may contain tax provisions specifically designed around the laws of the former state. Those provisions should be reviewed after a move rather than assuming they remain necessary or appropriate.
Owning property outside New Hampshire can complicate the analysis as well. If you maintain a second home, investment property, business interest, or other assets in another state, the laws of that jurisdiction may need to be considered. Residency in New Hampshire does not necessarily make every tax issue associated with property located elsewhere disappear.
Be Careful About Giving Away Appreciated Property
Lifetime gifting can be an effective estate planning strategy, but focusing exclusively on reducing the size of your estate can produce unintended tax consequences involving tax basis. When you purchase an investment for one amount and later sell it for more, the difference between your adjusted basis and the sale price generally determines the amount of taxable capital gain, subject to applicable tax rules. Suppose you purchased investment property many years ago for $150,000 and it is now worth $900,000. You might consider giving the property to your child during your lifetime, particularly if you want to reduce the value of your future estate. A lifetime gift generally carries the donor’s basis over to the recipient. Consequently, your child could would have to use the original $150,000 as the basis when determining capital gains taxes. Property inherited at death, however, is typically treated differently. Under current federal law, qualifying inherited property generally receives a basis adjustment based on fair market value at death. If the property’s basis is increased to approximately its date-of-death value, much of the appreciation that occurred during your lifetime may effectively disappear for purposes of calculating a later capital gain.
Keep Accurate Records of Lifetime Gifts
If lifetime giving is part of your estate planning strategy, careful recordkeeping is essential. Federal law permits taxpayers to make gifts using the “annual exclusion” valued up to $19,000 (as of 2026) to an unlimited number of recipients without using a portion of the donor’s lifetime federal gift and estate tax exemption. Qualifying payments made directly to educational institutions for tuition or directly to medical providers for eligible medical expenses may also receive special treatment under federal gift-tax rules. A gift that exceeds the annual exclusion does not automatically mean that you must immediately write a check to the IRS for gift tax. In many cases, the excess instead uses part of your available lifetime federal exemption and requires the filing of a federal gift tax return.
You might make substantial gifts for years without paying current federal gift tax, but those transfers can still affect the exemption available to your estate later. Without accurate records, determining how much exemption has previously been used can become more difficult. Gift-tax returns and supporting documentation should therefore be maintained with your important financial and estate planning records.
Consider the Income-Tax Consequences for Your Beneficiaries
Estate planning tax analysis should not end with taxes imposed on your estate. You should also consider the taxes your beneficiaries may face after receiving their inheritances. Moreover, different assets can carry dramatically different tax consequences. Cash may be relatively straightforward. Appreciated securities and real estate raise basis considerations. Traditional retirement accounts can create taxable income when beneficiaries take distributions. Roth accounts may receive different income-tax treatment, while business interests can introduce valuation, basis, and operational tax issues. This distinction becomes important when you are trying to leave beneficiaries approximately equal inheritances. The same problem can arise when comparing highly appreciated property with assets that have little embedded taxable gain. When your estate includes substantially different types of assets, tax-sensitive allocation can help you determine whether your intended distribution scheme will actually produce the result you envision.
Do Not Overlook Estate Liquidity
An estate can be wealthy and still have a cash-flow problem. This frequently occurs when a significant percentage of the estate consists of illiquid property. A family business, commercial real estate, farmland, valuable residential property, or other closely held assets may account for most of a person’s net worth while relatively little cash remains available. After death, the estate may nevertheless need money. The Personal Representative may face administrative expenses, professional fees, debts, property expenses, taxes, and other obligations. If sufficient liquid assets are unavailable, property may need to be sold, which can undermine years of planning. Comprehensive estate planning can help address these risks. Depending on your circumstances, appropriate life insurance, liquid reserves, business succession arrangements, buy-sell agreements, or trust planning may provide a source of funds without requiring an immediate sale of important family assets.
Can We Help You with Tax Planning for Your New Hampshire Estate Plan?
For more information, please join us for an upcoming FREE seminar. If you would like assistance with tax planning for your New Hampshire estate plan, contact our estate planning attorneys in our North Andover, Woburn, and Beverly offices at (978) 969-0331. Our Salem and Nashua, New Hampshire office can be reached at (603) 894-4141.
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