If you expect the value of the estate you leave at death to exceed the current federal lifetime gift and estate tax exemption ($15 million for an individual, $30 million combined for a couple in 2026), or if you live in one of the states (plus the District of Columbia) that has its own estate tax, you may be looking for ways to reduce your estate tax exposure and help ensure that more of your wealth passes to the people and charities you care about.
Learn more: What is the estate tax exemption?
Here are 7 ways you may be able to help reduce your taxable estate.
1. Make gifts during your lifetime
Transferring assets to your heirs now, while you’re still alive, may help reduce your overall exposure to estate taxes when you pass away. By taking advantage of the federal annual gift tax exclusion—$19,000 for an individual in 2026, $38,000 combined for couples—you can begin whittling away at your taxable estate all and enjoy watching your heirs make use of the assets you’re passing on. Gifting assets with a high cost basis may be preferable, as gifting an asset with a low cost basis would cost your inheritors a valuable step-up in basis at your death.
Learn more: The tax benefits of lifetime gifting
2. Superfund a 529 college savings plan
If you have children or grandchildren who have educational needs, you might consider “superfunding” a 529 college savings plan on their behalf. This is an advanced lifetime gifting strategy that takes advantage of a provision in the tax law that allows you to accelerate up to 5 years’ worth of annual gifts to a 529 plan—$95,000 in 2026. (Be aware, however, that you cannot make any further gifts to the beneficiary of the plan for the next 5 years; otherwise, those gifts would either reduce your federal gift and estate tax exemption amount or incur gift tax, as relevant.) Assets held in a “superfunded” 529 plan are not considered part of your taxable estate provided you do not pass away within 5 years of making the contribution.
Learn more: Making the most of your 529 plan
3. Convert a traditional IRA to a Roth IRA
While holding assets in a Roth IRA does not remove assets from your taxable estate, paying the income taxes incurred when converting traditional IRA assets to Roth assets technically does. The money used to pay the tax is removed from your estate—and given that the highest federal marginal income tax bracket (as of 2026) is 37%, what you’re paying in income tax on the conversion may be less than you would’ve spent on estate tax had that money remained in your estate, especially if you were subject to the 40% federal estate tax. Plus, you now have your remaining assets in an account that allows for tax-free growth and withdrawals and does not require minimum distributions. You are, in essence, pre-paying taxes for your heirs and leaving them an account that is exempt from some of the stricter rules regarding inherited IRAs.
Learn more: 4 ways a Roth IRA may benefit your estate plan
4. Transfer assets to an irrevocable trust
Setting up an irrevocable trust in which you place assets for the benefit of your heirs will remove appreciation on those assets from your federal taxable estate. There are, however, some important things to consider before pursuing this strategy. First, transfers to an irrevocable trust are, as the name makes clear, irrevocable. You cannot undo them. Second, by transferring assets to the trust, you are effectively making a gift, meaning that—similar to lifetime gifting—your heirs will miss out on a step-up in basis at your death for assets placed in the trust. So it’s important to be thoughtful about what you decide to include.
For families with substantial assets, a grantor retained annuity trust (GRAT) may be a useful option. A GRAT essentially freezes a portion of an estate’s value today while shifting the appreciation of those assets to beneficiaries potentially free of estate and gift taxes. GRATs are particularly helpful for families that have fully utilized their available federal estate tax exemption.
Learn more: Using a GRAT for tax-efficient wealth transfer
5. Consider "upstream" gifting
If the step-up in basis is a priority for you and your family, you may want to consider another advanced lifetime gifting technique. “Upstream” gifting involves gifting low-basis appreciated assets to an older member of your family for the ultimate benefit of a younger generation. By giving appreciated assets to an older family member (say, your parent), they can then leave those assets to you or your children, potentially reducing your taxable estate while preserving the opportunity for a step-up in basis at your parent's death. This technique requires that you can use your own gift tax exemption available to make the gift to your parent and also that your parent is not expected to die with a taxable estate.
This strategy is not without risk, however. Once you make the gift to your parent, whether or not they decide to leave the assets to you or your children is entirely up to them. In the event they change their mind or refuse to cooperate, you likely have no recourse. Similarly, any assets given to your parents would be potentially available to their creditors. Furthermore, if your parent dies within a year of the gift and leaves the assets to you, your basis would revert to what it was before the gift was made.
Learn more: Tax-efficient inter-generational wealth transfer
6. Set up a qualified personal residence trust (QPRT) for a personal residence
Transferring a personal residence such as a vacation home to a qualified personal residence trust (QPRT) may allow you to remove the value of the property from your taxable estate, minimizing the amount of exemption used, while continuing to enjoy the home for a period. With a QPRT, the trust takes ownership of the residence but gives the grantor the right to remain in the residence for a specific term. The value of the gift (and the tax incurred) is reduced by the value of the grantor’s retained interest in the property.
During the period you remain in the residence, you are responsible for all the taxes and upkeep for the property. At the end of the period, the trust’s beneficiaries (typically your children) take ownership of the property and you must either vacate the premises or (if the trust allows it) rent the home from them at fair market rent. A QPRT is only effective if the trust grantor lives through the end of the term, in which case appreciation on the residence is not included in the grantor’s estate. If the grantor dies before the term ends, the value of the home will be included in their estate at its date of death value.1
The transfer tax benefit comes from transferring the home into the QPRT now, when its value and the associated tax is lower, rather than letting the home pass at death, when the value of the home may have appreciated significantly.
Learn more: Should you consider putting your house in a trust?
7. Contribute to a donor-advised fund (DAF)
If charitable giving is important to you, contributing to a donor-advised fund (DAF) may be a smart way to support your favorite causes while removing assets from your taxable estate. Federal law stipulates that charitable donations made from your estate to a qualified charitable organization at the time of your death are fully deductible for federal estate tax purposes. Directing assets to a DAF can help accomplish this in a flexible, efficient, and forward-looking manner, as decisions about what specific charities you wish to support can be deferred and easily changed. Plus, you can name your heirs as successor advisors to the DAF, allowing them to carry your philanthropic intentions down through the successive generations of your family.
Learn more: 4 ways a donor-advised fund can help with legacy planning
Consult a professional
While each of these strategies may seem appealing in its own way, it’s important to determine how a strategy might affect your personal financial situation before taking action. A tax or estate planning professional can help you evaluate these options for reducing your taxable estate and work with you to identify the strategies best suited for your individual needs.