Every year, the IRS announces the estate and gift tax limits as well as the gift tax exemption. The gift tax exemption is the value you can gift to any other individual without that individual facing tax consequences for that gift. This year, the gift exemption remains at $15,000, though the estate tax limit went up. For many, this means another year of tax-free giving can occur, though it is always important to keep track of large gifts.
Potential Changes in Lifetime Exclusions
The upcoming presidential elections are certainly something that could impact gift and estate tax limits and thus something estate planners are watching closely. The IRS has already announced that it will not clawback lifetime estate transfers made under the current tax structure, something to consider with your estate planning attorney if you believe the next government is likely to lower these limits. Lifetime gift and estate tax exemption means any gift made in addition to the annual gift tax exclusions.
Using the Annual Gift Exemption as Part of Your Estate
Annual gifting is an important part of estate planning, especially for couples with a large estate. Giving $15,000 per person per year can quickly add up, especially if you’re giving to your children, grandchildren, and sometimes even your children’s spouses and grandchildren’s spouses. You and your spouse can both make gifts, doubling the amount you’re giving someone each year.
Keep in mind that this annual gifting limit does not include medical and tuition payments. As long as you are making those payments directly to the educational institution or medical provider, you can make unlimited payments on someone’s behalf. When coupled with lifetime annual gifts and the lifetime estate tax exemption, this means that you can make substantial gifts to children and grandchildren to help with important and expensive costs.
Giving away a substantial portion of your assets in your life, especially if your estate is close to the exemption limit, can substantially lower your estate tax bill. Whether this is a good idea for you will depend in large part on your estate size, goals, and even the type of assets you have. Certain types of assets can be highly variable in value and you want to give them to your beneficiaries when the value is high so that they can have a stepped-up basis from which to calculate capital gains.
The experienced trust and estates planning team from Dunn Law Firm have helped clients craft their estates to handle a wide variety of goals, family structures, and property interests. To learn more, reach out to the Dunn Law Firm by calling (435) 628-5405 to set up a free consultation today.
