How to Reduce Estate Taxes and Preserve Wealth for Future Generations

When it comes to passing on wealth, estate taxes can take a significant bite out of what you intend to leave behind. Fortunately, smart planning can help minimize those tax burdens while ensuring your wealth benefits the people and causes you care about. Here are some effective estate planning strategies to preserve your legacy:

Maximize the Estate and Gift Tax Exemptions

The federal estate tax exemption allows you to transfer a set amount of wealth without triggering estate taxes. In 2026, this exemption is scheduled to be significantly reduced unless Congress acts. Gifting assets during your lifetime—using the annual gift tax exclusion—can also reduce the size of your taxable estate. These exclusions allow you to give to multiple individuals each year without incurring gift taxes, helping to shift wealth efficiently to the next generation.

Use Trusts Strategically

Irrevocable trusts can move assets out of your taxable estate while allowing you to retain some control over how those assets are used. Grantor Retained Annuity Trusts (GRATs), Charitable Remainder Trusts (CRTs), and Irrevocable Life Insurance Trusts (ILITs) are powerful tools for reducing estate taxes and transferring wealth in a tax-efficient manner.

Plan for State-Level Estate Taxes

Several states impose their own estate or inheritance taxes, sometimes with much lower exemption thresholds than the federal government. Working with an advisor familiar with your state’s laws can help you avoid costly surprises and plan around those tax rules.

Consider Family Limited Partnerships (FLPs)

An FLP can be used to transfer business or investment interests to family members at a reduced value, thanks to valuation discounts. This strategy not only reduces the taxable value of your estate but can also help you retain control of the underlying assets during your lifetime.

Review and Update Your Estate Plan Regularly

Estate tax laws change frequently, and your plan should adapt accordingly. Life events—like marriage, divorce, the birth of a grandchild or a business sale—also warrant updates to ensure your strategy remains aligned with your goals.

Preserving your wealth for future generations starts with a proactive approach. At Illumination Wealth, we work closely with clients to design custom estate plans that minimize taxes, protect assets and create a lasting legacy. Contact us today to get started with your estate planning.