Understanding
estate taxes
Estate taxes, combined with income and transfer taxes, can erode up to half your estate. Here are four strategies to preserve more for your heirs.
1. Make lifetime gifts
The annual gift tax exclusion allows you to transfer assets tax-free each year. Systematic gifting over time can significantly reduce your taxable estate before death.
2. Use trusts strategically
Irrevocable trusts, charitable remainder trusts, and generation-skipping trusts can remove assets from your taxable estate while preserving their intended purpose.
3. Charitable giving
Donating to qualified charities reduces your taxable estate while leaving a meaningful legacy. Donor-advised funds and charitable lead annuity trusts offer additional flexibility.
4. Life insurance structures
An irrevocable life insurance trust (ILIT) can provide liquidity to pay estate taxes without requiring heirs to liquidate other assets or sell property under pressure.