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Reducing federal estate taxes generally means lowering the taxable value of your estate so that less (or none) of it is subject to tax when you die, or using planning techniques that shift future growth out of your estate entirely.

Background: Exclusion Amounts in 2026

In 2026, the federal estate and gift tax exemption increases to $15 million per individual (or $30 million for married couples, assuming portability of unused exemption). The annual gift tax exclusion remains $19,000 per recipient in 2026.

If the value of your estate at death exceeds the applicable exclusion amount, the excess is subject to federal estate tax (up to 40%).

Strategies to Reduce Federal Estate Taxes

1. Use Annual Tax-Free Gifts

You can give up to $19,000 per person per year without triggering gift tax or using up your lifetime exemption. For married couples, you can give $38,000 per recipient by splitting gifts.

2. “Superfund” 529 College Savings Plans

Contributions to 529 plans count as gifts for gift tax purposes, but you can contribute up to $95,000 in one year (or $190,000 for a couple) by electing to treat the gift as spread over five years. This reduces your taxable estate while funding education.

3. Lifetime Gifting Using the Unified Credit

You can use portions of your $15 million lifetime exemption now to make large gifts during life rather than at death, moving future growth out of your estate.

4. Irrevocable Trusts

Many kinds of irrevocable trusts remove assets from your taxable estate:

  • Irrevocable Life Insurance Trust (ILIT): Holds life insurance outside your estate so proceeds are not taxed.

  • Grantor Retained Annuity Trusts (GRATs): Transfer appreciating assets to heirs with minimal gift tax and trap future growth out of your estate.

  • Intentionally Defective Grantor Trusts (IDGTs): Shift assets (and future appreciation) out of your estate while you pay trust income tax.

  • Spousal Lifetime Access Trusts (SLATs): Let one spouse fund a trust for the benefit of the other, removing assets from both estates.

5. Dynasty & Generation-Skipping Trusts

Dynasty trusts can preserve and transfer wealth across multiple generations without triggering estate or generation-skipping transfer (GST) taxes on each generational death, using your GST tax exemption (also $15M in 2026).

6. Valuation Discounts

When transferring interests in a family business, LLC, or real estate, you may apply valuation discounts for lack of marketability or control, lowering the taxable value of what is gifted or bequeathed.

7. Charitable Planning

  • Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs) allow you to support charities while reducing your taxable estate and potentially generating income-tax benefits.

  • Private foundations remove assets from your estate while giving you control over long-term giving.

8. Direct Payments for Tuition & Medical Expenses

Payments made directly to educational institutions or medical providers on behalf of others are not treated as taxable gifts, so they reduce your estate without using your annual exclusion or lifetime exemption.

9. Marital & Portability Strategies

  • The unlimited marital deduction lets you transfer assets to your spouse free of federal estate tax, deferring tax until the surviving spouse dies.

  • Portability allows a surviving spouse to use the deceased spouse’s unused exemption, potentially giving a married couple a combined $30 million exemption.

Key Notes

  • Any annual gifts over $19,000 per recipient in 2026 must be reported on IRS Form 709 and count toward your lifetime exemption.

  • Certain strategies (like trusts and valuation discounts) require professional legal help and careful documentation to ensure IRS compliance and avoid unintended inclusion back into your estate.