This is a complicated question that can’t fully be answered here, but there are some things you may consider that could help minimize your estate taxes. They include:

• Setting up a trust. Depending on the value of your estate, establishing a trust can make excellent financial sense, as certain types of trusts may be used to reduce estate taxes.
  
  
• Designating the owner of your life insurance. The way you set up the ownership of your life insurance policy can make a difference with respect to estate taxes. For example, if someone other than you owns your policy, certain life insurance proceeds may remain outside of your estate upon your death.
  
  
• Titling of property. The way your property is titled can make a significant difference in whether or not that property is subject to estate tax upon your death. For example, transferring your property to an irrevocable trust as owner will often result in the property being excluded from your estate for estate tax purposes.
  
  
• Gifting your assets. You may make tax-free gifts up to the amount of the annual gift tax exclusion ($12,000 in 2008, $13,000 in 2009, indexed thereafter) to each person each year, and the assets that you gift are removed from your estate for estate tax purposes. As an example, if you have four grandchildren that you wish to give money to, you may give those grandchildren a total of $52,000 in 2009 ($13,000 to each). If you are married, you and your spouse could make joint gifts in 2009 to those grandchildren totaling $104,000.

The information outlined above is only a brief summary and does not provide comprehensive information about how to reduce estate taxes. Because the taxation of estates is a complicated issue, be sure to consult a legal or tax professional when you’re ready to take the appropriate steps to help reduce your estate taxes. For more in-depth information, you can also take our online Estate Planning tutorial.