IRA Beneficiary
34. Other Ways to Reduce Estate Taxes
There are other ways to reduce your estate tax burden, which you can use whether you are married or single.
One way is to reduce the size of your estate now, before you die -- and there are several ways you can do that. For example, you can make annual tax-free gifts. Each year, you can give up to $13,000 to as many people as you wish without having to pay a gift tax. If you are married, you and your spouse together can give up to $26,000 to each person. These amounts are tied to inflation and may increase from time to time.
You can give an unlimited amount for tuition and medical expenses if you give directly to the institution or health care provider.
Making gifts to qualified charities will let you save both estate taxes and income taxes because you also receive a charitable income tax deduction.
You can use an irrevocable life insurance trust to remove the value of your current life insurance policies from your estate. You do have to live for at least three years after the transfer; otherwise the value will be back in your estate.
There are a number of other proven strategies that can be used to transfer assets to your loved ones now, often at discounted values. We may not have them for much longer, because we know the IRS is not fond of them. But we do have them now, and we can use them.
And finally, you can buy life insurance. Depending on your age and health, this can be an inexpensive way to pay estate taxes.
There are right and wrong ways to do all of these, and we can help make sure you do them the right way.