Giving Gifts to Reduce Your Federal Estate Taxes

The vast majority of Americans will not need to worry about estate taxes affecting their estate. However, for those who are near or above the current federal estate tax exemption ($11.7 million for each person as of 2021), there are some strategies you can employ to reduce your tax liability. One such strategy is giving gifts.

You can make an unlimited number of gifts of $15,000 or less (as of 2021) to any individual with no tax penalty to you. Anything over the $15,000 gift tax threshold in a calendar year is subject to gift taxes. Giving non-taxable gifts reduces the total taxable value of your estate but taxable gifts do not, although the increase in value of taxable gifts between the date of the gift and the date of your death will escape estate taxation when you die.

Here are a few issues you should be aware of if you’re considering using this strategy:

• Couples: You and your spouse would each be able to give $15,000 to each individual. That means an individual could receive up to $30,000 from a couple without having to file a gift tax return.
• Spousal gifts: Most gifts to a spouse aren’t subject to a gift tax. However, giving gifts to your spouse might not benefit your estate, and could actually make matters worse for them upon their death, as their estate could grow significantly in value.
• Tangible property: Gifts of tangible property still count toward the annual gift tax exemption. You could, for example, give a vehicle during your lifetime, and if at the time of the gift, the fair market value of the vehicle is worth $10,000 you would have $5,000 remaining to give to such individual in that year.

For more information about using gifts to reduce your taxable estate, contact a trusted Tampa, Florida estate planning lawyer at BaumannKangas Estate Law.