Choosing the Right Time to Make a Gift
Since its creation in 1916, the amount you can pass to your heirs as a gift or in an estate without incurring tax liability has never been higher. With that exemption at an all-time high, it’s fair to ask whether now is the time to take action.
As of 2023, the top limit of the exemption for an individual is $12.96 million during their lifetime and upon their death. For a married couple, the amount is $25.84 million. The exemption limit means no amount of money below that will be subject to the federal gift or estate tax. If an estate exceeds that limit, the excess is taxed at 40 percent.
Gift Now or Gift Later
There’s already a plan in place to change the size of the gift and estate tax exemption. The total amount is scheduled to drop by 50 percent in 2026. Anyone with an estate large enough to incur federal estate tax liability needs to think about making a gift now to benefit from the current exemption level.
An estate that exceeds the current exemption level could see massive tax savings with the right strategy around lifetime gifting. For some, it may be better to hold off, even with the potential of seeing the exemption amount drop.
Many estates that fall below the current exemption size should also consider making a gift, however. If the exemption is cut in half for 2026, many estates will go from facing no estate tax liability to facing significant estate tax liability.
Maximizing the Value of Your Gift
Gifting can be a powerful tool when used correctly. If you’re in a position to make a gift, you need experienced legal guidance to maximize the benefit. You should consider the size of the gift, as well as its form when it comes to getting the full benefit under the tax laws. You need to ensure that your beneficiaries are kept in the loop. Finally, you need to understand the potential benefits and drawbacks of making your gifts through the use of a trust.
Call Us to Discuss the Best Gifting Strategy for Your Situation
At the Law Office of Janet L. Brewer, we have years of experience in estate planning, including crafting beneficial gifting strategies. Call our offices in Los Altos at 650-325-8276 or contact us online to speak with a California estate planning lawyer about your situation.
