Strategic Gifting to Minimize Estate Tax

Navigate Tax Savings Through Lifetime Gifting With Goldberg & Goldberg

Not all Americans are impacted by federal estate tax or federal gift tax, given the substantial lifetime exemption amounts. These are in the millions of dollars. The exemption is adjusted annually for inflation, and for married couples, the amount that can be passed on doubles.

However, for estates that may face estate tax, proactive gifting during your lifetime can mitigate or even eliminate the tax burden. Furthermore, there are additional rewards to lifetime gifting, such as the pleasure of witnessing your beneficiaries enjoy their inheritances.

You can provide unlimited individual gifts up to a certain dollar amount, all of which are exempt from gift tax. It’s important to remember that no single recipient can receive more than the ceiling within a year to maintain these tax advantages.

Maximizing Giving as a Couple With Goldberg & Goldberg

Couples can combine their exclusions, potentially gifting up to double the gift ceiling to an individual recipient each year with tax freedom. Consent between spouses can turn an individual gift into a joint one, doubling the impact of your generosity while staying within the confines of tax efficiency.

For example:

Consider the case of Joe and Faye, who wish to support their son’s homeownership dreams. They can collectively offer double the gift ceiling to their son and the same amount to his spouse, renewing this gift each new year.

Special Considerations for Spousal Gifts

Gifts between U.S. citizen spouses are exempt from tax, but non-citizen spouses have a certain ceiling. Equalizing property ownership can sometimes lead to an increased tax liability for the inheriting spouse later on.

Timing Is Everything

To leverage the annual exemption effectively, coordinate your gifting within the calendar year. Once the year has passed, that year’s opportunity for exemption cannot be reclaimed. Careful timing can avoid gift tax for larger gifts—spreading them across calendar years is a beneficial strategy.

Diversifying Your Gifting Strategy

Cash isn’t the only asset that can be gifted over time. Consider gradually transferring stocks, real estate, or other non-cash assets. Structuring these gifts thoughtfully can result in significant tax savings.

Example:

Solomon and Rhoda intend to give their son a family property worth $75,000. By strategically partitioning the property into partly shared ownership across calendar years, they’re able to maximize gift tax exemptions.

Gifts to Minors: Planning With Care

Gifting to minors necessitates responsible management of the gift until they reach adulthood. Trusts and custodianships under state law can facilitate this process, ensuring the minor has access to the property by the age of 21. Proper planning can include custodianships that expire at 21 or the option to extend a trust beyond that age.

Consider the Long-Term Impact Before Gifting

Gift-giving is a personal decision and should align with your comfort level. Concerns about your future financial needs or questions about the readiness of beneficiaries to manage wealth should be taken into account. Well-timed financial support, such as aiding with education costs or a home purchase, can make your legacy a powerful and supportive influence during pivotal life stages.

With life expectancy increasing, traditional timing of wealth transfers may result in beneficiaries receiving inheritances later in life. Early gifting can serve as timely assistance when it’s needed most.

For personalized advice on estate planning and strategic gifting, contact Goldberg & Goldberg at (301) 654-5757 to schedule your Free Consultation. Together, we can craft a plan that maximizes your generational wealth transfer while managing tax implications efficiently.