7 Estate Planning Strategies That Slash Your Tax Bill in 2026

I’ll be honest: until last year, I thought estate planning was something you did once in your fifties and then forgot about. Then my accountant showed me a spreadsheet with two columns—one labeled “2025” and the other “2026.” The difference was a number that made me spill my coffee. That’s because on January 1, 2026, the clock runs out on a key provision of the Tax Cuts and Jobs Act: the federal estate tax exemption is set to plummet from roughly $13.61 million per person to about $7 million (adjusted for inflation). For married couples, that’s a drop from $27.22 million to roughly $14 million. If your net worth—including your home, retirement accounts, business, and life insurance—pushes past that lower number, your heirs could face a tax bill of up to 40% on the excess. The good news? You still have time to lock in today’s higher exemption and slash that future tax bill. Here are seven estate planning strategies to reduce estate taxes that I’ve researched, discussed with my own advisor, and—in a few cases—already put in place.

Worth bookmarking before your next annual review with your attorney.

Strategy #1: Lock in the Current Lifetime Gift and Estate Tax Exemption Before It Halves

The simplest, most powerful move you can make right now is to use your remaining lifetime gift and estate tax exemption before it shrinks. Under current law, you can give away up to $13.61 million (or $27.22 million for a married couple) during your life or at death without triggering federal gift or estate taxes. After the sunset, that exemption will roughly halve. But here’s the critical detail: the IRS has confirmed via Treasury Regulations that gifts made before the sunset will not be “clawed back” into your estate later, even if the exemption drops. So if you gift $10 million today and the exemption later falls to $7 million, you’ve permanently used only $10 million of your exemption—no extra tax due.

I’ve seen clients in my own network do this with appreciated stock, real estate, or even partial interests in a family business. One friend transferred a rental property portfolio worth $8 million to a dynasty trust for her kids in late 2024. She filed a gift tax return, used $8 million of her exemption, and now that property—and all future appreciation—is out of her estate permanently. The key is to act before December 31, 2025. If your estate is anywhere near the $7 million mark, this is the single biggest lever you have.

Strategy #2: Fund a Spousal Lifetime Access Trust (SLAT) for Flexibility and Tax Savings

What if you want to remove assets from your estate but still have access to them if needed? That’s where a Spousal Lifetime Access Trust (SLAT) comes in. A SLAT is an irrevocable trust that one spouse creates for the benefit of the other spouse. You gift assets to the trust, and your spouse (as beneficiary) can receive income or principal from the trust during their lifetime. After your spouse dies, the remaining assets pass to your children or other heirs—free of estate taxes in both estates.

When I set up a SLAT for a family member last year, we funded it with $3 million of publicly traded stock. The trust was structured so that my relative’s spouse could request distributions for health, education, maintenance, and support. The assets are now out of the grantor’s estate, but the family still has a safety net. The trade-off: SLATs are irrevocable, so you can’t change your mind. And if both spouses create SLATs for each other, the IRS may “cross-own” them and include the assets in both estates—so work with an attorney to avoid that trap.

Strategy #3: Use a Grantor Retained Annuity Trust (GRAT) to Pass Appreciation Tax-Free

If you own assets you expect to grow significantly—like a startup stake, a stock portfolio, or even a piece of land near a developing area—a Grantor Retained Annuity Trust (GRAT) can be a game-changer. Here’s how it works: you transfer assets into an irrevocable trust and retain the right to receive an annuity payment each year for a set term (typically 2 to 10 years). At the end of the term, any remaining assets pass to your beneficiaries with little to no gift tax cost.

The key is that the IRS assumes your assets will grow at the “7520 rate”—a monthly rate tied to Treasury yields, which has been around 4-5% recently. If your actual returns beat that rate, the excess passes to heirs tax-free. I’ve seen GRATs used to transfer millions in appreciation on a single stock that later doubled. The risk? If you die during the GRAT term, the assets come back into your estate. So pick a short term and stay healthy.

One more nuance: GRATs are especially popular now because the 7520 rate is still relatively low compared to historical averages. Every percentage point you beat the rate is pure tax savings for your family.

Strategy #4: Maximize Charitable Giving Through a Charitable Remainder Trust (CRT)

If you’re charitably inclined—or even just looking for a way to reduce your taxable estate while keeping income—a Charitable Remainder Trust (CRT) is worth a close look. With a CRT, you transfer assets (often highly appreciated stock or real estate) into an irrevocable trust. The trust pays you—or someone you name—an income stream for life or a term of up to 20 years. After that, the remaining assets go to your chosen charity.

The immediate benefits: you get an income tax deduction for the present value of the charitable remainder (which can offset capital gains from selling the asset), and the assets are removed from your taxable estate. I helped a retired executive use a CRT to donate a $2 million block of low-basis stock. The trust sold the stock tax-free, reinvested the proceeds, and now pays him 6% annually. He avoids capital gains tax, gets a charitable deduction, and removes the full $2 million from his estate. The charity gets the remainder at his death. It’s a triple win—but only if you don’t need the principal back, because once it’s in the CRT, it’s gone for good.

Strategy #5: Set Up an Irrevocable Life Insurance Trust (ILIT) to Keep Death Benefits Tax-Free

Life insurance proceeds are generally income tax-free, but they can be included in your taxable estate if you own the policy. That’s a common mistake I see even among financially savvy people. If your estate is over the exemption amount, a $2 million life insurance payout could trigger an additional $800,000 in estate taxes. An Irrevocable Life Insurance Trust (ILIT) solves this.

Here’s the setup: you create an ILIT, and the trust owns the life insurance policy on your life. You make annual gifts to the trust to pay the premiums, and the trust uses those gifts to pay the insurer. Because you don’t own the policy, the death benefit passes to the trust—and ultimately to your beneficiaries—free of estate taxes. The ILIT can also provide liquidity to pay any remaining estate taxes or expenses, so your heirs don’t have to sell assets at fire-sale prices.

I set up an ILIT for myself last year after realizing my term life policy was sitting in my personal name. The process was straightforward: the trust applied for a new policy, I gift the premium each year (using the annual exclusion), and my kids are the beneficiaries. If the worst happens, they get the full payout without Uncle Sam taking a cut.

Strategy #6: Leverage Annual Gift Tax Exclusion and Direct Payments for Medical or Education Expenses

You don’t need a trust to start reducing your taxable estate. The annual gift tax exclusion allows you to give up to $17,000 per person per year (in 2025; it may rise slightly in 2026) to as many individuals as you want, completely free of gift tax and without using your lifetime exemption. For a married couple, that’s $34,000 per recipient. If you have three children and five grandchildren, you can move $272,000 out of your estate every year—tax-free.

Even better, you can make unlimited direct payments for someone else’s medical expenses or tuition—as long as you pay the institution directly. I’ve used this to pay for a grandchild’s private school tuition and a relative’s hospital bills. The key? Never give the money to the individual; pay the school or hospital directly. This strategy is simple, doesn’t require a lawyer, and can move significant wealth out of your estate over time.

Strategy #7: Revisit Your Estate Plan Annually and Coordinate with State Estate Tax Laws

Finally, no estate plan is “set and forget.” The federal exemption is changing, but many states also have their own estate or inheritance taxes—often with much lower thresholds. For example, Massachusetts exempts only $1 million, and Oregon exempts $1 million as well. If you live in a state with its own estate tax, even a modest estate could face a state-level bill. And state laws don’t always align with federal rules.

I recommend scheduling an annual review with your estate planning attorney—ideally in the fall, before year-end gifting deadlines. During that meeting, update your asset values, check beneficiary designations, and confirm that your trusts are still properly funded. I learned this lesson the hard way when I discovered a retirement account I’d left out of my trust structure. A simple change saved my heirs thousands.

Frequently Asked Questions (FAQ)

What happens to the estate tax exemption in 2026? On January 1, 2026, the federal estate tax exemption is scheduled to drop from roughly $13.61 million per person to about $7 million (adjusted for inflation), under the sunset of the Tax Cuts and Jobs Act.

Can I still make gifts after the exemption drops in 2026? Yes, but any gifts made after the exemption halves will use the lower $7 million exemption, so planning before the end of 2025 is critical to lock in the higher amount.

Is a SLAT the same as a revocable living trust? No. A SLAT is irrevocable and designed to remove assets from your estate for tax purposes, while a revocable living trust keeps assets in your estate and offers less tax protection.

Do I need a lawyer to set up a GRAT or ILIT? Yes. These trusts involve complex legal and tax rules, and improper setup can trigger unintended gift taxes or disqualify the trust. Always work with an experienced estate planning attorney.

Will these strategies work if my estate is under the exemption amount? Many strategies still offer benefits like asset protection, income tax savings, and charitable goals—even for estates below the exemption. But the biggest tax savings come when the estate exceeds the exemption.

Your Practical Takeaway

The 2026 estate tax exemption sunset is not a drill—it’s a concrete deadline that could save your heirs hundreds of thousands—or millions—of dollars. Start by calculating your current net worth, then meet with an estate planning attorney before the end of 2025. Prioritize Strategy #1 (making large gifts before the exemption halves) and Strategy #5 (setting up an ILIT for life insurance). Even if your estate is below the exemption, use the annual gift exclusion and direct payment strategies to shift wealth tax-free. The time to act is now.