Understanding Estate Taxes
14. Tax free gifts
Let's move on now to some other tax-reducing strategies that everyone can use, whether you are married or single. One of the best ways to reduce estate taxes is to reduce the size of your estate.
For example, currently you can give up to $12,000* ($24,000 if married) to as many recipients as you wish each year. So if you give $12,000 to each of your two children and five grandchildren, you will reduce your estate by $84,000 a year (7 x $12,000) - $168,000 if your spouse joins you.
You can give more, but then it will start using up your $1 million gift tax exemption.
You can also give an unlimited amount for tuition and medical expenses if you give directly to the institution or health care provider.
*The amount of these tax-free gifts is now tied to inflation and may increase every few years.