How To Minimize Your Estate Taxes

The estate tax is a tax on the transfer of property at the end of one's life, and it encompasses an accounting of everything owned or had an interest in on the date of death. If the value of the estate exceeds $13.99 million in 2025, it will be subject to an estate tax. There are ways to minimize the estate tax, including using trusts and life insurance. An estate above a certain dollar amount can be taxed by the federal government, with rates ranging from 18% to 40%. Inheritance is not taxed by the federal government, but some states do levy an inheritance tax. Life insurance can be used to pay estate taxes by establishing a trust that owns an insurance policy on one's life. Irrevocable trusts can also be used to avoid taxes, as the assets in the trust are not considered personal property and are not included in the estate valuation. Charitable trusts, such as charitable lead trusts and charitable remainder trusts, can also be used to reduce estate taxes. Gifting money to beneficiaries before death and funding education accounts for children or grandchildren can also help reduce the estate. Finally, it is essential to lay out a plan and know the estate tax rules of the state where you live to minimize estate taxes.