Large estates that contain millions of dollars’ worth of assets are potentially subject to major tax obligations. Once the total value of the estate reaches $13.99 million, as of 2025, the estate may be responsible for federal estate taxes.
The federal estate tax is a progressive tax, which means that the more property the estate contains, the higher the tax rate that applies. Estate taxes can diminish an estate by anywhere from 18% to 40%. Thankfully, there is no California estate tax.
What tactics can people take to reduce the estate taxes to be assessed against their estates after they die?
Changing ownership limits taxes
Any assets held solely in the name of the person who dies become part of their estate. People who take on co-owners, especially if they arrange for an automatic transfer of interest, can prevent their assets from becoming part of an estate and being subject to federal estate taxes.
For financial accounts, it may be possible to submit transfer-on-death paperwork to allow a specific beneficiary to assume ownership of a bank account. Those with real property holdings could execute a transfer-on-death deed to keep their real estate out of probate court.
Trusts are also a useful resource for those trying to reduce the value of an estate to avoid or minimize estate taxes. Property owned by a trust does not become part of an estate when the trustor who funded the trust passes. Other strategies might be beneficial as well, including strategic gifts to family members and other chosen beneficiaries.
Individuals concerned about estate taxes and optimizing their legacies may need to discuss their holdings and different estate planning tools with a skilled legal team. With careful planning, it is possible to minimize estate taxes or even avoid them entirely.