8 Estate Planning Strategies That Move $38,000 a Year Tax-Free

Estate planning isn't just for billionaires — the same trusts, gift exclusions, and tax strategies used by ultra-wealthy families work for retirees with modest savings.

The $19,000 annual gift tax exclusion for 2026 lets couples move $38,000 per person out of their taxable estate yearly — one of eight strategies the ultra-wealthy use that everyday retirees can adopt.

"For most retirees, it has nothing to do with tax. What wealthy families are really buying is control and privacy; it's a clean handoff, and those things cost the same for everyone," said Matt Odgers, co-founder of Opelon LLP.

Baby boomers are expected to pass down $84.4 trillion to heirs by 2045 as part of the "Great Wealth Transfer," with roughly half coming from high-net-worth households. A revocable living trust can be set up with an attorney for $400 to $4,000, avoiding probate delays and public filings. Roth IRA conversions during low-income years — the stretch between retirement and required minimum distributions — allow retirees to convert at lower ordinary rates. Long-term capital gains on assets held more than one year are taxed at 0 percent, 15 percent, or 20 percent.

The strategies matter because the annual exclusion resets every January with no carryover, and gifts locked in trusts without Crummey withdrawal rights don't qualify. A married couple with six grandchildren represents 12 separate exclusions in a single year — $228,000 moved out of the estate tax-free.

The Gift Exclusion and Trusts That Do the Heavy Lifting

The annual exclusion is written into 26 U.S. Code §2503(b), which carves out the first $10,000 of gifts to any one person per year, indexed for inflation. The IRS set the current figure in Revenue Procedure 2025-32, fixing the 2026 exclusion at $19,000. Form 709, the U.S. Gift Tax Return, is only required when a gift to one person exceeds that number in a calendar year, or when spouses elect gift-splitting.

Any U.S. person can make a gift, and just about anyone can receive one — grandchildren, kids, in-laws, even friends. No relationship requirement and no income test. The recipient owes no federal income tax on the gift, since gifts do not count as income under IRC §102. Gifts to a non-U.S.-citizen spouse have their own separate limit of $194,000 for 2026, while gifts to a U.S.-citizen spouse are unlimited under the marital deduction.

The exclusion covers only gifts of a "present interest," meaning the recipient has the right to use the money right away. Funds locked in a trust generally don't qualify unless the trust includes Crummey withdrawal rights. There's also an unlimited exception under IRC §2503(e) for paying tuition or medical bills directly to the school or provider, but only if the check goes straight to the institution.

Beyond the gift exclusion, revocable living trusts keep major assets — homes, investment accounts, other property — out of probate. "The wealthy aren't leaning on a will. A will does not avoid probate, and probate is generally slow, public, and costly. A revocable living trust does the quiet work instead," Odgers said. The trust can be changed or revoked anytime during the grantor's lifetime.

Spousal Lifetime Access Trusts (SLATs) allow one spouse to create an irrevocable trust for the other's benefit, removing assets from the taxable estate while the beneficiary spouse can still access income or principal if needed. Irrevocable Life Insurance Trusts (ILITs) keep death benefits out of the taxable estate, with premiums often covered using the annual gift tax exclusion.

Tax-Efficient Moves for Modest Portfolios

Roth IRA conversions work especially well for retirees with smaller nest eggs. "Convert traditional retirement money to a Roth during your low-income years — often the stretch after you stop working but before Social Security and required minimum distributions begin," said Ryan Maynard, Managing Partner at Vaquero Private Wealth. "In those years your taxable income can be unusually low, so you convert at a very low ordinary rate and move that money into a Roth, where it grows and comes out tax-free for the rest of your life and for your heirs."

Long-term capital gains are one of the most valuable breaks in the tax code, Odgers said, and they're not based on estate size. Holding investments for more than one year qualifies for rates of 0 percent, 15 percent, or 20 percent, versus ordinary income rates that can reach 37 percent.

Transfer-on-Death (TOD) and Payable-on-Death (POD) designations on brokerage accounts, bank accounts, and CDs allow funds to transfer directly to beneficiaries, bypassing probate. Because TOD and POD designations supersede instructions in a living trust, they must be carefully coordinated — complex assets like real estate go in the trust, while simpler accounts can name the trust as the TOD or POD beneficiary.

Family LLCs bundle assets like real estate or a family business, allowing owners to transfer non-controlling shares to heirs at a discounted valuation. "Heirs can secure access, enjoyment, and management without direct ownership," said Kevin Quinn, estate planning attorney and President at Legacy Counsellors, PC. "This structure shields wealth from creditors, divorces and lawsuits, while ensuring a structured legacy for future heirs."

"You don't have to copy the ultra-wealthy exactly," said Trent Von Ahsen, CFP and Managing Partner at Cedar Point Capital Partners. "The same underlying principles are available to basically anybody."

All figures cited reflect IRS rules and tax rates as published for 2026. Readers should verify current figures against the latest official IRS announcements, as exclusions and thresholds are indexed for inflation and can change annually. This content is for informational reference only and does not constitute professional advice.