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The estate tax monster is going to get you. The question is not "if," but "for how much." What do you estimate your estate tax to be? Is it $5 million? How about $50 million? Let's select an estimated tax, for instance $10 million, to work with for the rest of this column.

Write down your estimated estate tax, so you can enjoy playing the how-to-win-the-estate-tax game. You can win. Instead of getting caught in the tax trap of concentrating all of your efforts on lowering the estate tax, start by changing your goal, which usually is lowering your estimated estate tax. Note: In the year 2011, your estate tax would be $10 million—if you are married—on a $21 million net worth. By using the tax strategies you read about in this column—family limited partnerships, gifting concepts and various trusts—you can reduce that $10 million tax hit (by 35 percent to 45 percent) to $6.5 million. When you know how to implement the strategies, it's fairly easy to do, and you can control all your assets—including your business—for life.

However, $6.5 million is still a hefty estate tax bill. So you will need to set a new goal: transfer all of your wealth (in this example, $21 million) to your family intact, with all taxes paid in full.

So how can you create $6.5 million of tax-free wealth? By getting into a tax-free environment—there are two in the law—while you are alive, and stay there until you die. The two environments are 1) charity and 2) life insurance.

This column deals with the insurance aspect, which is actually a new, ingenious way to enjoy the wealth-building benefits of life insurance. You don't pay premiums with cash, but instead you borrow each premium as it comes due from a bank. Interest is paid (not in cash), but by adding it to the loan. The concept is called "premium financing."

Of course, someday you will get hit by the final bus. The bank will then be paid (the loan and interest) out of the insurance death benefits.

To demonstrate how premium financing works, we have taken the following numbers from a real-life client's files. The client and his wife—Joe (age 64) and Mary (age 63)—want to create $10 million of tax-free wealth ($6.5 million to pay their estimated estate tax liability, and $3.5 million for their family.) With premium financing, the actuaries rev up the computer, which spits out pages of numbers. The key numbers show that $14.5 million of second-to-die insurance is needed: $4.5 million is needed to pay off the premium loans, plus interest, leaving a net of $10 million to Joe and Mary's family. The entire $10 million is tax-free, with no income, gift or estate taxes.

The out-of-pocket cost is about $360,000 for transaction costs, to be paid to the bank for various services over Joe and Mary's lifetime (to age 100, according to the computer).

You should also know the most popular uses for premium financing. For individuals, uses are: 1) pay estate taxes (whether you are single or married); 2) create additional tax-free wealth for the family; 3) fund a major gift to charity (often the family foundation); and 4) divide the death benefits between family and charity.

Your corporation (or other business entity) can join the premium-financing-wealth-transfer-fun. The concept can be used—usually for two or more lives—to fund: 1) a buy/sell agreement (this is great for your cash flow); 2) key employees' retirement plans; and 3) large gifts to charity (insuring the lives of officers or members of the board of directors).

Is premium financing for you? Unfortunately, it is not available to every individual who might want it. First, you must qualify. Obviously, you must be insurable. However, if you are married, then you can still get in the game with if only one—either spouse—is insurable. Also, your net worth must be a strong minimum of $5 million (no fudging on the value of your assets).

Additionally, corporations must be profitable and adequately capitalized.