Death. It’s not the most desired family dinner discussion topic while also asking someone to pass the potatoes. But planning for what you leave behind is as essential as living in the moment. And, no, we didn’t swipe that saying from a fortune cookie. There are smart, simple strategies you can implement now to save your loved ones and beneficiaries from avoidable taxes after you pass – and spare them unnecessary stress during a time meant for grieving. 

Here are seven tips for getting strategic with your legacy and reducing estate taxes.

1: Be Prepared for Changes to the $13.61 Lifetime Estate Tax Exemption 

We don’t know for sure, but there is the possibility that the current exemption will drop in the near future. While the current $13.61 million (double that for married couples) estate tax exemption mightn’t apply to you now, planning for legislative shifts is essential. There’s industry speculation that once it ‘sunsets’ in 2025, it will revert back to the pre-Trump 2017 Tax Cuts and Job Acts (TCJA) era to around $7 million per person, half of its current exemption. That shift would affect many more Americans who should be on alert.

“What’s left of 2024 and into 2025 is definitely the time to start your wealth-transfer plan,” says Ascend Advisors’ Senior Tax Manager Diana Vinder. “Being aware that, by 2025, we should know how 2026 and beyond is affected.”

2: Add Gifting to Your Annual Estate Tax Reduction Strategy

Gifting is more than garnering a guaranteed smile. It’s one of the most straightforward and impactful ways to reduce the taxable value of an estate, making it a go-to strategy for those looking to pass on wealth minus the worry for ones left behind. Giving assets directly to whomever you select as your recipient – be it family, friends, or some lucky random – while you’re still alive, gradually lowers the value of your estate, sidestepping or lowering an estate tax bill for your beneficiary. 

How does it work? Gifting reduces the value of your estate. So, you’re giving it away now, rather than waiting and incurring a hefty estate tax bill for your death beneficiary. The current annual gift tax exclusion is $18,000, increasing to $19,000 in 2025. This means you can gift each individual $18,000 worth of assets, and there are no limits to how many individuals you give to. And, if you’re a married couple, that exclusion amount doubles. So, $18,000 becomes $36,000. Staying under this per-person exclusion means you don’t need to declare it to the IRS.

“It’s a simple annual strategy with long-term benefits for US citizens,” says Diana, reminding non-US citizens to check how exemptions do and don’t apply to them. “And don’t wait,” she adds. “Make use of this annual exemption, pop it on your yearly to-do list.”

3: Form an LLC for Real Estate or Business Transfer

For legacy planning, a family Limited Liability Company (LLC) is a valuable strategy to shift wealth to beneficiaries and reduce estate tax exposure. By forming an LLC and transferring assets such as investment property or business holdings, parents or senior family members can gift LLC membership interests to younger generations, typically their children or grandchildren. This approach reduces the value of these assets in the taxable estate while preserving management control for the original owners. Gradual transfers of LLC interests also allow families to leverage annual gift tax exemptions, incrementally decreasing the estate's taxable portion efficiently.

Diana says to speak to your tax consultancy team to understand the ins and outs of utilizing an LLC for estate tax benefits but believes it’s an effective tool. 

“By gifting now, you're basing it on today’s fair market value,” Diana explains. “For example, if you’re going to gift a portion of your rental property today under an LLC, we’ll document that we’re gifting ten percent of the current value, say $500,000, versus ten percent of $800,000 or whatever it might grow to in 10 years.”

4: Set Up A 529 Education Plan

A 529 plan can serve as a meaningful gift for beneficiaries and a practical way to reduce your taxable estate. Contributing funds toward a loved one’s educational expenses, will support their future while removing the assets from your estate’s taxable value. Contribute up to $18,000 annually without triggering gift tax implications, and the IRS allows you to front-load five years’ worth of contributions, or up to $90,000 per beneficiary, in one hit. It’s a tax-efficient way to gift with long-term benefits. But as Diana explains, there are conditions.

“Accelerating the annual gifting by five times in one year means you need to pause that recipient’s yearly gift to avoid exceeding the annual gift tax exclusion or face tax payments,” says Diana.  

5: Consider Custodial Accounts for Minors

Setting up a custodial account – Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) – can be an effective tax move for those looking to reduce their estate value while benefiting a minor. The gifted assets become theirs once they reach adulthood. Meanwhile, the account offers flexibility in investment choices and can be used for various expenses, including education. Though assets remain technically part of your estate until the beneficiary reaches legal age, the gradual transfer of funds can help lower estate values while positively impacting their future.

6: Donate to Charities

Imagine making a lasting difference in the world while lightening your estate’s tax load. Donating to charity can be a meaningful way to reduce your estate’s tax burden while contributing to causes you truly believe in. Diana points out that the beauty of this strategy is its limitless benefits, but to ensure diligence in your selection – giving to the local kids’ lemonade stand won’t cut it. 

“There’s no limit to the amount you can gift to charities from a tax perspective,” Diana says. “But you need to ensure it’s a legitimate charity from the government’s perspective.”

Not only do charitable contributions reduce the size of your taxable estate, but they can also offer current-year tax return benefits. Options such as establishing a donor-advised fund (DAF) can be beneficial, but consult with your tax representative so fees don’t dissolve your donation’s value. 

7: Create a Revocable Trust

Establish a revocable trust to maintain control over your lifetime of how your assets will benefit loved ones once you’re gone. Assets placed into the irrevocable trust don’t count towards your estate’s gross value. You decide which assets to include, and you can add or remove items as your priorities shift. A revocable trust can complement a will, but you should seek legal advice on how to fund your trust efficiently. And, as Diana explains, there’s no ambiguity surrounding your legacy wishes.

“No one can challenge your intentions in terms of gifting or not gifting. Once you’re gone, it becomes irrevocable,” says Diana. “It can be very detailed, including certain conditions about asset access, such as age limits for younger children. The revocable trust is one of the most common trusts used for wealth transfer and legacy planning.” 

Summary: What Matters Most

There are many considerations when it comes to wealth transfer, tax reduction, and estate value. Most importantly, you want to enjoy the time you have while you’re here and leave a lasting impact on those you love – which includes using simple solutions to help them avoid hefty taxes.

A Crucial Estate Checklist

✓ Work with an experienced tax advisor and lawyer, and ensure open communication between both parties.
✓ Document key information for your beneficiaries, such as bank account details, passwords, subscriptions, and any other items to avoid unnecessary stress for your loved ones.
✓ Be detailed with your wealth transfer intentions – the what (and its value), who, when and any other conditions or finer details to avoid ambiguity.
✓ Appoint a trustee you, you guessed it, trust to handle your estate inheritance wishes.
✓ Keep informed on state legislation.