Techniques used to avoid estate taxes involve various different scenarios. The two most powerful techniques are appropriate use of yours and your spouse's lifetime exemption, and the use of yearly gift exemptions, (currently 12,000 per person gifted.) One of the simplest techniques people can utilize is making annual gifts to their loved ones. If these gifts fall under the 12,000 dollar exemption, no estate or gift tax has to be paid on the transfer. However, many people feel uncomfortable with this technique because they do not like giving up control of their funds or they are concerned with the "financial sense" of those they are gifting to.

Another common, and relatively uncomplicated technique, is the use of an AB or Q-TIP Trust. Such trusts are appropriate for married couples. These techniques utilize the unlimited exemption between spousal gifts, as well as utilizing each spouses individual lifetime exemption amounts. Proper use of this technique can allow a couple to utilize their assets during life, and still "shelter" millions of dollars at their death.

Federal estate taxes are expensive—the rate is 46% in 2006, 45% in 2007 and 2008—and they must be paid in cash; usually within nine months after you die. Since few estates have this kind of cash, assets often have to be liquidated. By planning ahead,  however, estate taxes can be substantially reduced or even eliminated.