When you are estate planning, accounting for tax efficiencies may help your heirs and beneficiaries receive potential benefits. Without proper planning, a portion of your assets may be subject to estate taxes. To help you support efforts to preserve your wealth for future generations, consider implementing some of the tax strategies below.
What are Estate Taxes?
Estate taxes are often colloquially known as “death taxes.” In other words, they are the taxes owed to the federal (and sometimes state) government after a person dies. There are also inheritance taxes—and these are separate from the estate tax.
Many states, like Texas, do not levy an estate tax at the state level. If you live in one of these 38 states, you only need to concern yourself with the federal estate tax.
As of 2025, this applies to estates over $13.99 million. If your estate is less than $13.99 million as an individual, you will not owe any estate taxes. If you are married, the estate tax only applies to estates over $27.98 million.
Assets beyond this amount are taxed at a top rate of 40%.
40% Taxes? How Can I Reduce That?
A 40% estate tax is a big number, and it’s easy to see why many people want to plan ahead. At that rate, taxes could take a meaningful portion of what you intend to pass along to your beneficiaries.
There are strategies that, when structured appropriately, may help manage or reduce potential estate tax exposure.
Gift Tax Exemption
The gift tax exemption was recently announced for 2025. This tax allowance permits individuals to gift up to $19,000 to individuals without reducing their lifetime exemption. Married couples can gift individually to the same person, allowing $38,000 to be transferred annually to an individual without incurring tax penalties.
Generally, no gift tax is due if the gift stays within these limits.
There is also a lifetime tax exemption on gifting. This was also recently updated in 2025, and this exemption allows a giver to give up to $13.99 million to an individual without incurring taxes.
Under current law, the IRS provides lifetime exemption—you can make this gift once, and then you must abide by the yearly gift tax exemption (and any potential future raises to the lifetime tax exemption).
How Do I Move Forward?
First, remember that this is only relevant if your estate is worth $13.99 million as an individual or $27.98 million if you are married. If you do not meet this criterion, your estate will not be subject to the federal tax penalty.
If you do meet the threshold, consulting with a qualified financial professional can help you assess the feasibility of these exemptions. For some individuals, it may make sense to start taking advantage of the gift tax exemption in their early 40s. For others, that money may need to stay invested for several decades in order to provide their desired financial stability in retirement*.
The best approach will depend on your specific assets, retirement needs, and estate goals.
When You Consult a Professional, Consider Asking the Following Questions:
How can I make the most of the gift tax exemption to potentially reduce my taxable estate?
If I gift the yearly maximum to my desired beneficiaries, will I still have enough assets to maintain my desired retirement lifestyle?
At what age would you recommend I begin taking advantage of the yearly gift tax exemption?
Is it more beneficial for me to utilize the yearly gift tax exemption or the lifetime gift tax exemption?
Estate planning is a complex process, but it’s an essential component of preserving and transferring your wealth efficiently. Our advisers are available to discuss legacy and estate planning, and we would be happy to assist you with any questions you may have. Call (469) 212-8072 or visit www.gdswealth.com to learn more.
* These examples are hypothetical and provided for illustrative purposes only. Individual circumstances vary . GDS Wealth Management (“GDS”) is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. GDS does not provide tax or legal advice. You should consult your tax advisor, accountant, and/or attorney before making any decisions with tax or legal implications. The information provided herein is general in nature, current as of 2025, and subject to change without notice. It should not be construed as personalized investment advice or a solicitation to buy or sell securities. There is no guarantee that the strategies discussed will be effective or appropriate for your individual circumstances. For more information about our services, fees, and disclosures, visit https://www.gdswealth.com.
