Charting Your Legacy: Gifting Strategies to Reduce Estate Taxes

When it comes to estate planning, one of the most effective ways to preserve wealth and minimize future estate tax liability is through strategic gifting. By thoughtfully transferring assets during your lifetime, you not only reduce the taxable value of your estate but also create opportunities to support loved ones and causes that matter to you. Here are some key gifting strategies that can help you lower estate taxes while maintaining control over your financial future.

Maximize the Annual Gift Tax Exclusion

Each year, the IRS allows individuals to gift a set amount per recipient without triggering gift tax or reducing their lifetime exemption. For 2025, the annual exclusion is $19,000 per recipient. Married couples can combine their exclusions, allowing them to gift $38,000 per recipient each year. Regularly using this strategy can gradually lower your taxable estate while providing financial support to family members.

For example, a couple with three children and four grandchildren could gift a total of $266,000 in a single year—completely tax-free. This could provide funds for college tuition, a down payment on a home, or other significant expenses. By continuing this approach annually, the couple steadily reduces their estate while putting resources directly into the hands of loved ones who can benefit now.

Use Lifetime Exemptions to Gift Appreciating Assets

Beyond the annual gift tax exclusion, the IRS offers a lifetime gift and estate tax exemption, which was $13.99 million per individual in 2025 and is adjusted annually for inflation. This exemption allows you to make larger gifts that exceed the annual limit without immediately triggering gift tax. It is particularly powerful when applied to assets likely to appreciate, such as real estate, investments, or a family business. By transferring these assets now, you remove both their current value and potential future growth from your taxable estate, potentially saving substantial estate taxes.

For example, a couple owns a $5 million rental property that could appreciate to $10 million over ten years. By gifting it to their children using the lifetime exemption, they remove the property’s current value and future appreciation from their estate, potentially saving millions in taxes while securing the asset for their heirs. Similarly, a grandfather who owns $1 million of company stock that could grow to $3 million over a decade can transfer it now, shielding the $2 million in potential growth from estate taxes.

Pay Education and Medical Expenses Directly

A smart way to give without using up your gift tax exclusions is to pay for a loved one’s qualified education or medical expenses directly to the school or healthcare provider. These payments are not considered taxable gifts and do not count toward your annual or lifetime exemptions.

For example, a grandparent could pay $50,000 directly to their granddaughter’s university for tuition. This payment is excluded from gift tax, allowing the grandparent to provide meaningful support without impacting their annual or lifetime exemptions.

Combine Gifting with Charitable Giving

Charitable gifts can both reduce your estate and provide immediate income tax benefits. Tools such as Donor-Advised Funds (DAFs) and Charitable Lead Trusts (CLTs) allow you to maximize your charitable impact while strategically lowering estate taxes, creating a legacy that benefits both your heirs and the causes you care about.

For example, a family could establish a Charitable Lead Trust with $500,000. The trust distributes $50,000 per year to their favorite charity for ten years, after which the remaining assets—now significantly reduced in estate value—pass to their children. This strategy simultaneously supports charitable causes and minimizes estate taxes, creating a legacy for both family and community.

Leverage Irrevocable Trusts

For those looking to structure gifts more formally or manage complex assets, irrevocable trusts provide additional tools to reduce estate taxes while achieving specific financial and philanthropic goals:

• Irrevocable Life Insurance Trust (ILIT): Removes life insurance proceeds from your taxable estate, ensuring the payout goes directly to beneficiaries’ trusts.

• Grantor Retained Annuity Trust (GRAT): Allows you to transfer appreciating assets at a reduced gift tax cost, preserving future growth outside your estate.

• Charitable Remainder Trust (CRT): Provides income to you or your beneficiaries during the trust term, with the remainder going to charity, creating both tax advantages and a philanthropic legacy.

Estate Planning Advisory Experts

Strategic gifting not only minimizes estate taxes but also ensures your wealth has a meaningful and lasting impact. With over 67 years of leadership, experience, and expertise, our talented team of CPAs and advisors understands the nuances of estate planning. In today’s ever-changing economic landscape, we provide resources that go beyond traditional audit, accounting, and tax services. We can help you develop a comprehensive estate plan that streamlines the process, minimizes tax liabilities, and ensures your assets are distributed according to your wishes. We will work with your attorney as they draft the legal documents required to implement a plan that best suits your needs—providing peace of mind for you and your loved ones across generations.

Here to Help You Navigate Gifting Strategies

Estate planning is not a one-time task but an ongoing process that should evolve with your business and personal life. If you have questions about your unique situation or need strategic financial advice, we are here to help you on this journey of charting your legacy. Contact us to let us know how we can best support you.