We are entering the “Season of Giving.” For most that brings to mind Black Friday shopping, wrapped gifts both practical and fanciful, time with family, and lots of food. Perhaps for some, year-end charitable giving and others, monetary gifting to family, as part of an estate tax planning strategy.
This coming year there will be lots of noise about the federal gift and estate tax exemptions because they are scheduled to reset on January 1, 2026. The current allowance of $13.61 million per individual will be reduced back to similar allowances prior to the Tax Cuts and Jobs Act of 2017, roughly $7 million per individual, unless Congress acts first.
Fortunately, the annual gift tax exclusion is not scheduled to change any time soon. An individual is allowed to gift another individual up to $18,000, and the number of gifts is unlimited. IRS reporting is not necessary and it will not impact a person’s lifetime federal gift or estate tax exemptions.
For decades, annual gifting has seemingly been a simple way to reduce a future taxable estate or simply provide support to family members. Please keep in mind that gifting can also have unintended consequences. For instance, depending on your circumstances, gifting may not be the best strategy for Medicaid eligibility planning.
A relatively small percentage of people will be impacted by the federal gift and estate tax exemptions reset. However, if your assets equal $7 million as an individual or $14 million for a married couple, you should consider meeting with a team of professionals to discuss your options. The team might include an experienced estate planning attorney, a tax advisor, and a financial planner. Together they can help you decide the best course of action that will allow you to take advantage of the current exemption amounts before they reset.
There is simply not enough space on this page for a complete discussion of the myriad of possible issues and estate planning opportunities impacted by these gifting taxes. Reach out to a local estate planning attorney to help you figure out what best suits your situation.
Leah B. Trowbridge, Estate Planning Attorney
The McIntosh Law Firm, P.C.
https://www.mcintoshlawfirm.com/attorneys/leah-b-trowbridge/
704-892-1699