Is it Possible to Reduce my Federal Estate Taxes to Zero?

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Yes, the estate tax is a voluntary tax! You can choose to pay it by not planning ahead, or you can reduce or even eliminate it with planning. The easiest and simplest way to eliminate the Federal estate tax at death is to not allow your estate to be valued more than the Federal Estate Tax exemption.

On the other hand, if your estate considerably exceeds the Federal Estate Tax exemption, then there are several steps you can take to reduce or eliminate the estate tax altogether. The simplest step is to leave your excess estate (over the Federal Estate Tax exemption) to a qualified charity. This may be suitable if you’re charitably inclined. If not, this will take property away from your heirs who would have received at least part of that amount after paying the estate tax.

Other possible plans to avoid or eliminate estate taxes and provide flexibility in overall planning include: revocable trusts with bypass trusts; property transfers during life to discounted entities; charitable trusts established during life and/or at death; and life insurance policies to pay the taxes on behalf of the estate. It is beyond the scope of this book to discuss the details of these strategies, but your advisor will be happy to discuss them with you.

Unfortunately, the government requires a taxpayer to jump through certain legal hoops and undertake some fairly sophisticated planning to avoid or eliminate estate taxes, but it can be done.