The reason inter vivos trusts work to reduce or avoid estate administration tax is because they result in a person transferring property owned by them to the trust which results in legal ownership vesting in the trustee and beneficial ownership vesting in the beneficiaries. This takes the property out of the estate of the testator (with some exceptions depending on how the trust is structured and what rights the testator may retain).

Inter vivos trusts are discussed on the Trust Planning page and visitors are recommended to view those materials for more information.