"The problem that happens is that, if people are inheriting money, most of the planning that needs to be done is too late," Hobart says. "If Uncle Joe dies and people are getting his money, Uncle Joe needs to make preparations before that time comes." Don't be Uncle Joe. You can spare your heirs some of the above tax burden by transferring your own life insurance policy to an irrevocable trust or you can get creative with avoiding the estate tax, which heads back down to a $1 million threshold in 2013. A family loan, for example, can help the estate appreciate in value while leaving the excess for an heir or that heir's trust fund. For funds to actually be considered a loan and not a gift, it needs to have a minimum "applicable federal rate" of 0.19% percent for terms less than three years, 1.2% for a three- to nine-year loan and 2.64% percent for more than nine years. "Let's say Mr. and Mrs. Welloff, who are in their early 60s, lend their daughter, Jane, 25, $100,000, and give her a nine-year loan at 1.20%," Bergman says. "As part of the deal, Jane invests in a diversified portfolio of stocks, bonds and REITs that produces an annual average return of 7% annually over nine years. After paying $1,200 in interest payments each year for nine years, plus repaying the $100,000 principal at the end of the ninth year, Jane would have $69,472 in her account." Amplify that a bit and heirs will be able to earn nearly $700,000 on a $1 million estate without breaking through the fed or the state's $1 million estate tax cap. It's a nice little savings, though it can get a little risky depending on the heir. "I wouldn't lend money if I knew my child was going to take money, go to Vegas and bet on red," Bergman says. "I don't like those odds." -- Written by Jason Notte in Boston. >To contact the writer of this article, click here: Jason Notte.