Adults fine-tuning their estate plans as they prepare for retirement or think about maximizing their legacy generally have to consider taxes. As personal holdings increase in value, the risk of estate tax looms large. The more a person directly owns, the greater their chances of estate tax applying when they die. Estate taxes are progressive, which means more valuable estates pay higher tax rates.
Those with millions of dollars in resources may want to transfer as much of that as possible to their loved ones. Unfortunately, estate taxes could limit what their intended beneficiaries actually inherit.
There are numerous estate planning strategies that people use to reduce what their estate could owe in estate taxes after they die. Strategic gifting can be a part of a broader tax avoidance strategy.
Regular gifts can diminish estate tax liability
Generous gifting to loved ones can be a way of reducing what an estate is worth. The lower the value of the estate, the lower the chances of estate taxes. However, gifts can also be subject to taxes. Therefore, those seeking to optimize their legacies generally need to plan carefully.
In 2025, the maximum gift one person can make to another without incurring taxes is $19,000. If married couples make gifts jointly, that amount increases to $38,000. Both cash and physical assets can contribute toward the maximum gift value each year. Taking on co-owners and transferring assets to a trust can also be important elements of a tax minimization strategy.
Creating a robust estate plan that optimizes what beneficiaries inherit and minimizes estate exposure requires careful preparation. Exploring different options for limiting tax liability can be beneficial for those with valuable resources that they want to transfer to specific beneficiaries.
