Estate taxes carry some of the highest tax rates in the IRS tax code. In fact, it’s not uncommon for wealthy individuals who have died to have their estates decimated by income taxes due to poor planning. In these cases, heirs may end up with very little property or assets, even though the estate was worth a large amount of money. To distribute an estate in the best possible way for heirs, individuals should look into methods that reduce the taxable amount of their estates. If they do, they'll be able to lessen the impact of tax rates on their heirs. 

1. Start spending.

The easiest way to cut the possible taxes on your estate is to start spending as much of it as you can to reduce the size of it. Of course, you don't want to spend so much that you leave your heirs with nothing, but if you use some of your disposable income now, less of it will incur income tax after your death. An especially advantageous way to spend part of your estate is to give liberally to established non-profit organizations and charities. You'll be sharing your wealth with deserving organizations and getting a sizable tax benefit. In fact, you'll actually receive a two-fold tax break - your estate will be getting smaller, and you'll be able to deduct the tax contributions to charity on your return.

2. Transfer part of your business to an heir.

If you own a business that makes up part of your estate, another way to reduce the size of your estate for tax purposes is to start transferring part of your company to your heirs now. One way to do this is to establish your business as a family partnership and then slowly begin transferring the share of it to your beneficiaries. As you increase their share, yours will automatically decrease.

3. Consider establishing an irrevocable trust.

An irrevocable trust is an excellent way to reduce your estate. When you place assets into an irrevocable trust, your heirs won't have to pay any estate tax on them at all after your death. You can also set up the trust so that you can still receive income off the value of it during your lifetime.

Estate taxes can indeed be high, but they don't have to cause your estate to lose all of its value. With careful planning, you can reduce the size of your taxable estate and spare your heirs a hefty tax bill.