Transferring assets through trusts and shares has become a refined strategy among America’s wealthy to sidestep estate taxes that can reach as high as 40%.
In the United States, both federal and state governments levy taxes on the assets of the deceased, including estate and inheritance taxes. Beginning in 2026, the federal government will apply estate taxes only to inherited assets valued at $15 million or more, with a top rate of 40%.
At the state level, approaches vary. According to the Tax Foundation, 12 states and the District of Columbia impose estate taxes, while five states levy inheritance taxes. Maryland is the only state that collects both.
Estate tax is assessed on the total value of a deceased person’s assets before distribution to heirs. Inheritance tax, by contrast, is paid by beneficiaries based on the value they receive. Most estate taxes and some inheritance taxes are progressive, meaning rates rise with the value of the estate or inheritance.
Washington state imposes the highest top estate tax rate at 35% on taxable estate value exceeding $9 million. Hawaii follows, with a maximum rate of 20% on estates above $10 million. Eight other states and the District of Columbia apply top estate tax rates of 16% on taxable amounts ranging from $5 million to $10.1 million.
For inheritance taxes, Kentucky and New Jersey levy the highest top rate at 16%. Iowa previously had the lowest inheritance tax rate, capped at 2%, before eliminating the tax entirely in 2025. In Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania, inheritance tax systems vary based on the beneficiary’s relationship to the deceased, with closer relatives benefiting from lower rates and higher exemptions.
Despite relatively high statutory rates, wealthy Americans have turned minimizing estate-related taxes — and ensuring the smooth transfer of wealth across generations — into what experts describe as a fine art.
“It’s a strategic chess game played over decades,” said Mark Bosler, an estate planning attorney and legal adviser to Real Estate Bees.
According to data from the Bipartisan Policy Center, federal estate tax revenue in the United States is estimated at $37 billion in 2025. Between 2025 and 2034, the levy is projected to generate roughly $579 billion in total — accounting for less than 1% of anticipated federal budget revenues.
Meanwhile, a report by UBS Global Wealth Management found that as of 2025, the U.S. was home to 924 billionaires, nearly one-third of the global total. Their combined net worth reached $6.9 trillion, up 18% from 2024. Mark Bosler of Real Estate Bees noted that while the average American may rely on a simple will, the wealthy deploy far more sophisticated strategies when planning the transfer of their fortunes.
One favored tool is the trust, prized for its confidentiality. When properly structured, a trust can reduce or remove assets from the taxable estate. It also facilitates smoother wealth transfers by avoiding probate — the court-supervised process of validating a will — thereby saving time and legal expenses.
According to Renee Fry, CEO of estate planning firm Gentreo in Quincy, Massachusetts, probate-related costs can consume between 3% and 8% of an estate’s value. “You’re letting assets that should go to your children or loved ones end up in the hands of lawyers and the courts,” she said, describing scenarios where no trust is in place.
Another widely used strategy involves passing down appreciated stock holdings. For example, an uncle who spent $1,200 to buy 100 shares of Nvidia in 1999 could see that investment grow — through stock splits and price gains — to more than $9 million by the time of his death, leaving the entire stake to a nephew.
If the nephew sells the shares for $9 million, he would owe little to no capital gains tax because the taxable gain is calculated from the stock’s value at the time of inheritance, not from the uncle’s original purchase price. In estate planning, this mechanism is known as the “step-up in basis,” allowing wealthy families to continue compounding wealth without triggering significant tax bills for heirs.
Benjamin Trujillo, an adviser at wealth management firm Moneta in St. Louis, Missouri, likened the rule to “a magic trick” — and one that is entirely legal. “Assets like stocks can quietly appreciate for decades, and when they are inherited, the tax bill often disappears,” he said.
Lawmakers have periodically proposed limiting the step-up provision, but it remains intact and has become one of the most powerful tools for intergenerational wealth accumulation. Experts note that the rule also applies to other assets, including artwork, real estate and collectibles.
To avoid additional complications, many wealthy Americans also designate beneficiaries directly on bank accounts and other financial assets. In the U.S., beneficiary designations typically override instructions in a will, helping to prevent disputes later on.
“It’s one of the simplest ways to transfer assets without running into trouble,” said Allison Harrison, an estate planning attorney in Columbus, Ohio.
Experts say the divide between rich and poor lies not only in the size of the fortunes passed down, but also in the mindset surrounding estate planning. “Wealthy families prepare in advance,” Fry said. “They don’t leave their assets and critical decisions unprotected.”
