High Net Worth Tax Strategies That Actually Work

If you’ve built up significant wealth, you’ve probably come across plenty of tax advice that sounds great but feels more complicated than it’s worth. The truth is that effective high net worth tax planning strategies aren’t about finding a magic loophole. It focuses on understanding how the different pieces of your financial picture fit together and arranging them in a way that legally minimizes what you owe.

In this post, I’ll share real strategies that can help families save significant tax dollars. To see how all these strategies work together, check out our complete guide, High Net Worth Tax Planning: Advanced Strategies.

What Makes High Net Worth Tax Planning Different?

Most tax advice focuses on the low-hanging fruit. Max out your 401(k), contribute to an HSA, call it a day. That works fine until your wealth hits a certain level, and then those cookie-cutter rules just don’t cut it anymore. When your income and assets start climbing, the tax code throws curveballs you never had to worry about before. Phase-outs, surtaxes, estate exposure, and rules that seem to get more complicated with every zero on your net worth. That’s where these strategies come in.

Strategy #1: The “Goldilocks” Roth Conversion

Roth conversions are among the best high-net-worth tax-planning strategies, benefiting a wide range of people. They are powerful and easy to implement, that’s why they are number one. But they aren’t without risk, and if you get the timing wrong, they can be counterproductive.

If you convert too much in a single year, you’re possibly paying taxes at a higher rate than you would in the future when you would be taking distributions. You might even trigger IRMAA, which is just a fancy acronym for Medicare Premium Surcharges based on your income.

The key is to find the Goldilocks zone. Converting enough to fill up your lower tax brackets, but stopping when you’re about to cross into a higher one. Which bracket and how far you go depend on several variables, most importantly, your projected future tax brackets.

We recently worked with a couple, let’s call them Jeff and Susan. They had done a great job saving and walked in with about $2.1 million in traditional IRAs.

Here is what this looks like in real life:

Having $2 million is a great problem to have, but it comes with a ticking tax bomb. When Jeff and Susan turn 73, the IRS will require them to take Required Minimum Distributions (RMDs). Based on their Social Security and other assets, those RMDs were going to push them straight into the 32% tax bracket and spike their Medicare premiums.

We looked at their timeline and found a window of opportunity: The Tax Grand Canyon Years

Jeff and Susan were retiring a few years before their pensions and Social Security payments kicked in. That meant their income would be artificially low for a few years. Instead of relaxing and enjoying a 0% tax bill during those years, we voluntarily recognized income. We converted chunks of their IRA into Roth IRA money, intentionally filling up the 22% tax bracket.

It is much more tax-efficient to pay 22% now than to pay 32% later. By paying the taxes during the tax canyon years rather than waiting until RMDs, they could save significant taxes and IRMAA surcharges. And that is putting it mildly.

Strategy #2: The Section QSBS 1202 Exclusions – Small Business Bonus!

If you are a founder or an early investor, Section 1202 is the tax equivalent of finding a winning lottery ticket in your old jeans. Most business owners have never heard of it, which is surprising since it could be the single most generous tax break in the tax code.

Here is the fact: The government really wants you to start or invest in small businesses. To encourage you to take that risk, they offer a massive reward. If you follow the rules, you can sell your shares and pay 0% federal capital gains tax. Nada, zip, nothing.

Thanks to the 2025 OBBB, it got even better. The cap on tax-free gains was raised to $15 million (up from $10 million), and the limit on the size of companies you can invest in jumped to $75 million.

The Valuable Example:

Lisa and Paul started a small business, structured it as a C-Corp, and invested $400,000 of their own money.

Fast forward several years. They sold the business for $6 million. Normally, the IRS would be first in line to collect its taxes. And without proper planning, Lisa and Paul would be on the hook for roughly $1.33 million in federal taxes. But because their stock qualified for Section 1202 (QSBS), their federal tax bill was $0.

They kept the full $6 million. That is an astounding difference realized through careful planning.

The “Gotchas” (Because there are always gotchas):

Before you get too excited, there are strict rules:

• No LLCs or S-Corps: It has to be a C-Corporation.
• Original Owner: To qualify, your money must go directly to the company to help it grow (this is called “original issuance”). If you write a check to the company to buy stock, you’re good. If you buy stock “second-hand” from a founder or another investor who wants to cash out, you don’t qualify.
• No “Service” Businesses: If your business relies on your reputation—like doctors, lawyers, consultants, or hospitality—you are out of luck. The IRS specifically excludes these fields.
• The State Problem: Not all states play along with federal rules here, so you may still owe state taxes.

If you fit the criteria, though, this is the one time the tax code actually lets you have your cake and eat it, too.

Strategy #3: The “Sell It to Yourself” Freeze (IDGT)

This strategy sounds like a loophole, but it is completely legitimate and arguably one of the most powerful high net worth tax planning strategies for transferring a growing business to the next generation without triggering a tax event.

The Setup: You create a specialized irrevocable trust called an Intentionally Defective Grantor Trust (IDGT). You then “sell” your business or real estate to that trust in exchange for a promissory note.

The “Magic” Trick: Why sell to your own trust? Because of a beneficial quirk in the tax code, the IRS treats you and the trust as the same person for income tax purposes but as separate people for estate tax purposes.

• No Capital Gains Tax: Since you are selling to yourself, there is no capital gain to report on the sale.
• The Freeze: You swap a volatile, appreciating asset (the business) for a boring, static asset (the promissory note). The business grows inside the trust, outside of your estate.
• The Burn: You legally pay the income taxes on the trust’s earnings. This sounds like a penalty, but it is actually a superpower: You are effectively making additional tax-free gifts to your heirs by paying their tax bills for them, further reducing your taxable estate.

The Exit Strategy

The Situation: Jack and Diane own a company worth $8 million. Their total estate is approaching the $30 million cap, and they are worried that the business, which is still growing, will push them over the cliff, triggering a 40% tax on the excess.

The Fix: Structure an installment sale to an IDGT.

• Step 1 (Seed): Jack gifts $800,000 cash to the trust (using a slice of his exemption) to give it “skin in the game.”
• Step 2 (Sale): Jack sells the $8M business to the trust for a 9-year promissory note at the IRS required rate (approx. 4.5%).
• Step 3 (Flow): The company pays Jack $360,000/year in interest. He uses this for retirement income.

The Result:

• Projected Business Value in 10 Years: $15.7 Million
• Value in Carl’s Estate: $8 Million (The Note)
• Value Transferred Tax-Free: $7.7 Million

Jack froze the business’s value at today’s price. The $7.7 million in growth happened entirely outside his estate, saving the family roughly $3 million in future death taxes.

The “Gotchas” (The Fine Print)

• Cash Flow is King: The business must generate enough cash to pay the interest on the note. If it misses payments, the IRS may argue the whole sale was a sham gift.
• No Step-Up: Unlike assets you hold until death, assets in an IDGT generally do not receive a “step-up in basis.” Your heirs may eventually face capital gains taxes if they sell the business, but paying 20% capital gains is usually better than paying 40% estate tax.
• Mortality Risk: If you pass away before the note is paid off, the remaining balance is pulled back into your estate. This strategy rewards those who plan early.

Strategy #4: Grantor Retained Annuity Trust (GRATs)

A GRAT is one of the few strategies where you win regardless of what happens.

You put assets into a trust. The trust pays you back over a few years. Usually two or three. Most advisors actually set up a new GRAT each year, so they overlap. That way, if one doesn’t pan out, the others might. Whatever is left over at the end goes to your heirs.

Here’s where it gets interesting. The IRS sets a “hurdle rate.” Presently, around 5%. If your assets grow faster than that rate, the extra growth passes to your heirs completely tax-free. No gift tax. No estate tax. Nothing.

And if the assets don’t beat the hurdle rate? You just get your money back. You’re no worse off than when you started.

It’s a rare case where heads, your kids win, and tails, you break even.

Case Study: The Joneses, Business Owners with Concentrated Stock

Sam and Maria Jones owned a family business worth about $10 million. They wanted to start transferring value to their three adult children without burning through their $15 million estate tax exemption.

They set up a 3-year GRAT funded with $4 million of the business interest.

Over the next three years, the business grew 12% annually, well above the IRS hurdle rate of 5.2%. At the end of the term, approximately $800,000 in “excess” growth passed to their children completely free of gift and estate tax.

Sam and Maria used zero exemption. Paid zero gift tax. And their kids received $800,000 that will never be taxed.

The Catch:

• If you die during the GRAT term, the assets are returned to your estate. This is why GRATs are typically short (2-3 years) and often “rolling.” You set up a new one each year.
• If the assets don’t outperform the hurdle rate, you’ve accomplished nothing. But you haven’t lost anything either.
• GRATs work best with assets you expect to appreciate quickly. business interests, concentrated stock, or real estate.

For families who want to transfer wealth but aren’t ready to give up control (or their exemption), GRATs are the “try before you buy” option in estate planning.

Strategy #5: Locking in the $15 Million Exemption

Who this is for: Families worth $30M+

We finally got some clarity from Congress last July. The 2025 Tax Act set the estate tax exemption at $15 million per person ($30 million for married couples) and made it “permanent.” These are the key high-net-worth tax planning strategies.

If you have $10 million or $20 million, you can breathe easy. The federal estate tax is likely off the table for you.

But if you are sitting on more than $30 million, the problem has changed. It’s no longer about if you have an exemption—it’s about keeping it.

The “Hurricane Insurance” Reality. I look at this exemption like buying hurricane insurance in Florida. You don’t cancel your policy just because the forecast looks sunny today.

In Washington, “permanent” just means “until the next election.” If a new administration decides to drop that number back down to $7 million, your estate could suddenly be on the hook for millions in retroactive taxes.

The only way to protect yourself? Use the “grandfathering” rule before the rules change again.

Real Life Example: The Morrisons ($42 Million Estate). Let’s look at Thomas (68) and Rebecca (65). Between their real estate holdings and the family business, they’re worth about $42 million.

Even with the new, higher $30 million exemption, they still have a $12 million problem. That is $12 million sitting at risk of a 40% tax rate.

If their assets grow over the next decade, that tax bill will only get uglier.

The Move: The Spousal Lifetime Access Trust (SLAT)
We used a strategy that allows Thomas to give money away without really losing it. He transferred $14 million of real estate into a SLAT for Rebecca’s benefit.

Here is why this is the “have your cake and eat it” strategy:

• The Lock-In: By moving $14 million now, Thomas “uses up” his $15 million exemption while it’s still on the books. If Congress later cuts the exemption to $7 million, the IRS has promised not to “claw back” this gift. He is grandfathered in.
• The Freeze: Any future growth on that real estate happens outside his taxable estate. If that $14 million grows to $25 million, that extra $11 million of growth is tax-free.
• The Access: Thomas didn’t give the money to a charity or a stranger. He gave it to a trust for his wife. Rebecca can still receive distributions from the trust if they needs money for health or lifestyle. Thomas loses direct access, but the family unit retains the benefit.

The Result?
By moving assets out now rather than waiting until death, the projected tax savings are massive.

• Tax Bill (Do Nothing): $11.2 Million
• Tax Bill (SLAT Strategy): $2.8 Million
• Net Savings for Heirs: $8.4 Million

The Catch (Yes, there is always a catch)
SLATs are not for everyone.

• You need a stable marriage: if you divorce, your spouse will still retain the trust benefits. You are effectively funding your ex’s lifestyle tax-free.
• No “Reciprocal” Deals: You and your spouse can’t just create identical trusts for each other. The IRS does not allow that. The drafting has to be precise.

For families looking to secure generational wealth, this is a critical opportunity.

The Last Word on high net worth tax planning strategies

A Roth conversion can trigger Medicare surcharges. Selling a business might provide an opportunity for both QSBS and an IDGT. A GRAT makes more sense when it’s rolling alongside a SLAT. These aren’t stand-alone tactics. They’re chess moves all on the same game and board.

The families who pay the least aren’t the ones with the most clever tax-planning teams. They’re the ones who plan early, think long-term, and ask the right question: not “How do I cut my tax bill this year?” but “How do my family and I pay the least tax over our lifetimes?”

That’s a harder question. It’s also the one worth answering, and the one we will help you with.

Schedule a complimentary Tax Strategy consultation to discuss your specific situation.

Disclaimer: The examples presented are based on real and hypothetical situations. Details have been changed. Tax laws change frequently, and individual circumstances vary. The strategies described may not be appropriate for everyone. Please seek advice from a certified professional before implementing any tax strategy.