3 Effective Strategies to Protect Your Estate from Taxes

If you have millions of dollars, here are three ways to protect over 40% of your estate from taxes this year.

1. Understand the Lifetime Gift Tax Exemption

The current lifetime gift tax exemption of $13.99 million is set to expire on January 1st, 2026, reducing to $7.2 million per person. Almost double the remaining amount could be subject to a 40% estate tax, plus up to an additional 10% state tax.

If you like control or don't want to part with your money, you could choose to do nothing. However, that could significantly impact your heirs down the line.

2. Maximize Funding of an Irrevocable Trust

You could consider maximizing the funding of an irrevocable trust, allowing $27.98 million between you and your partner. Over 30 years, this could grow into more than $80 million in estate tax-free assets.

3. Hedge Your Bets

Another strategy is to hedge your bets: one parent can fund the trust while the other retains control of the money. This approach allows you to protect part of your estate while maintaining some degree of control and reducing risk.

Remember, all of these strategies require careful planning and time to implement effectively.

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