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This holiday season, make the most out of your estate plan, and give a gift to the ones you love
Gifting is one way to enjoy the estate planning process by giving financial assistance to your loved ones while you’re still living. And what could be better than that, especially around the holidays? But because some gifts may be vulnerable to taxation without a proper donation strategy, we have what you need to know about this estate planning tactic to keep it from causing more harm than good. Here’s how gifting can help you optimize your taxes while avoiding unnecessary complications.
What Is Gifting?
A gift is the transfer of assets to an individual, where the receiving party gives nothing of equal value in return. By gifting assets, the total value of an estate is decreased by the amount given. However, to prevent individuals from simply unloading their estates to avoid taxation, certain regulations—such as the gift tax—are in place. This tax, imposed on the transfer of property, aims to maintain equity in the system.
Fortunately, there are exceptions that make gifting an appealing means of asset distribution. For 2024, the annual gift tax exclusion allows you to gift up to $18,000 per recipient without incurring gift tax or filing requirements. For couples filing jointly, this amount doubles to $36,000 per recipient. This estate planning strategy offers significant tax benefits to both givers and recipients, especially when used strategically over multiple years.
How Gifting Works in Estate Planning
An individual can leverage annual gifts to transfer substantial sums out of their estate over time. These assets can be placed in trusts, LLCs, or life insurance plans to optimize their value and provide long-term benefits. Additionally, direct payments for someone’s medical or tuition expenses are exempt from gift tax if paid directly to the provider, making it another effective way to support loved ones without impacting the annual exclusion limit.
The Lifetime Gift and Estate Tax Exemption
For 2025, the lifetime gift tax exemption is $13.99 million, up from $13.61 million in 2024 per individual. This exemption applies to the total value of gifts made during a person’s lifetime and their estate’s value upon death. Utilizing annual exclusions alongside this lifetime exemption can significantly reduce the taxable value of an estate, ensuring that more assets are preserved for your heirs.
However, it’s essential to note that the increased exemption limits introduced under the 2017 Tax Cuts and Jobs Act (TCJA) are scheduled to expire at the end of 2025, potentially reverting the exemption to around $6.8 million per individual (adjusted for inflation). This potential change underscores the importance of proactive planning.
Is Gifting Right for You?
If your estate is subject to taxation, maximizing these exemptions may be a valuable addition to your estate plan. Gifting can be particularly beneficial for:
Parents who wish to assist children or grandchildren financially while reducing their estate’s value.
Individuals looking to fund educational or medical expenses without tax implications.
Those interested in transferring wealth into long-term vehicles like trusts or retirement accounts.
To determine whether gifting aligns with your financial goals and estate planning needs, consult with experienced estate planning attorneys. Contact us, we’re here to answer your questions and help you prepare for tomorrow, today.
About Anselmo & Wojcicki, LLP
Anselmo & Wojcicki, LLP is a multi-disciplinary law practice based in Schaumburg, Illinois, specializing in real estate, estate planning, tax planning, business formation, and the sale and purchase of businesses. Our commitment to our clients and our values set us apart from the crowd. Our team of legal specialists has a wealth of experience and expertise to help you meet your legal needs. We are dedicated to providing quality service and building lasting relationships with our clients.
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