It's the perfect time to talk about how estate planning can help minimize your tax burden—not just for you, but for your loved ones as well. Thoughtful estate planning doesn’t just distribute assets—it also protects them from unnecessary taxes and ensures your legacy is passed on as efficiently as possible. Below, our San Diego estate planning lawyer shares some important tax-saving strategies to consider.
Take Advantage of the Lifetime Gift Tax Exemption
The IRS allows individuals to gift a significant amount during their lifetime without incurring gift tax. For 2025, the federal lifetime gift and estate tax exemption is expected to remain high (though subject to change). By gifting assets during your lifetime, you can reduce the taxable value of your estate and potentially pass on more to your heirs.
Annual Gift Tax Exclusion
You can also gift up to $18,000 (per recipient) in 2024 without dipping into your lifetime exemption. Married couples can give up to $36,000 together. Making these annual gifts is a great way to gradually transfer wealth while avoiding taxes.
Use Trusts to Your Advantage
Trusts—especially irrevocable trusts—can be powerful tools for minimizing estate taxes. Certain types of trusts remove assets from your taxable estate, shield wealth from estate taxes, and even offer protection from creditors.
Popular examples include:
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Bypass Trusts (Credit Shelter Trusts)
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Grantor Retained Annuity Trusts (GRATs)
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Irrevocable Life Insurance Trusts (ILITs)
Each serves a unique purpose and should be tailored to your specific goals.
Step-Up in Basis
If you own appreciated assets like real estate or stocks, passing them through your estate rather than gifting during life can offer a major tax break. Heirs receive a “step-up in basis” on inherited assets, which can significantly reduce capital gains taxes if they choose to sell.
Charitable Giving
Charitable donations—either during life or through your estate—can reduce both income and estate taxes. Tools like charitable remainder trusts (CRTs) or donor-advised funds can help you make an impact while also creating tax efficiencies.
Plan for State Estate Taxes
Not all tax exposure comes from the federal level. Depending on where you live, state estate or inheritance taxes might apply at lower thresholds. Proper planning can help you navigate and minimize these potential state tax hits.