One way to reduce your taxable estate is through an annual family gifting strategy. You can give up to $16,000 per year to any individual without having to file a federal gift tax return or pay gift taxes.
If you have three adult children, and give them each $16,000 each year, you will move $48,000 a year out of your taxable estate. If you also make gifts to their spouses, this amount doubles. If you also have grandchildren or other heirs, you can further increase the amount you move out of your estate each year by giving to them as well.
These gifts do not have to be cash. You can give away interest in real property or a business- the nice thing about doing that is that any appreciation in value after the initial gift also goes to your heirs without any gift or estate tax consequences.
​In order to be most effective, this is a strategy best started earlier rather than later, as you are capped in the amount you can give away each year.