There are many people who will look for even the tiniest deduction on their annual tax return but will not bother about minimizing the ultimate tax they might have to pay on their assets. This tax is estate tax. In order to minimize estate tax, you have to plan and this takes effort.

Most people are reluctant to think about estate tax planning because they are do not want to think about dying or they are simply clueless that estate tax will eat up a large portion of their estate.

When we talk about estate, it includes your home, personal investments, all pension plans, life insurance and annuities. If your estate is valued over $2 million, you will have to pay estate tax and that is why it is imperative that you spend time on estate tax planning.

Some of the popular strategies for estate tax planning are as follows:

o Credit Shelter Trust: If you use this way of saving estate taxes, your spouse will not have to pay anything when you die. The same tax benefit applies when the second spouse also passes away leaving the assets to the heirs. This means that you can put assets worth $2 million in credit shelter trust so that both your spouse and your heirs benefit from it.

o Gifting: You can lower your estate taxes by gifting but there are certain annual limits. You can gift just $12,000 a year to each person without incurring gift tax. This is done during your life time and you can do this annually so that your estate value decreases by the time you die.

o Insurance for liquidity: Smart planning reduces estate tax but does not necessarily eliminate it. Therefore, you should provide a way for your heirs to pay estate taxes, which has to be paid within nine months of your death. The best way to provide for this is through life insurance where the death benefit is large enough to cover the taxes. However, this is where prudence comes in. If you own the insurance, it will be considered as part of the estate. So, instead of having the insurance in your name, the policy can be owned by an adult child or by a life insurance trust that you can set up.