Gifting to younger family members can be used as a strategy to reduce estate taxes. However, it also comes with the potential for the recipients to become wasteful or lose their incentive. There are ways around those problems, according to Private Wealth in "Purposeful Family Gifting."
The idea is a fairly simple one.
You can give gifts as a way to incentivize younger people to do good things. For example, a gift of cash could be conditioned on someone needing to graduate from college or hold a job for a certain period of time, before they will receive the cash.
The options are nearly limitless.
If you tell someone they can get a gift of cash if they do something, then, within reason, you can incentivize your family to do many good things.
Additionally, there are many forms those gifts could take other than cash. For instance, if you would like to make a charitable gift to a qualified entity, and you are over 70 ½ and taking your required minimum distributions from IRAs and 401(k) plans, it may make sense to use your RMD first to make those gifts as it may be considered a tax-free charitable gift.
The attorneys at Schlagel Long can advise you on a gifting strategy that fits your unique circumstances in creating an estate plan.
Reference: Private Wealth (July 19, 2017) "Purposeful Family Gifting."