Older adults thinking about their legacies often try to limit their future tax obligations. Making regular gifts to family members and other beneficiaries can be an important part of that strategy.
By making gifts while still alive, older adults can watch their selected beneficiaries enjoy their inheritances. Additionally, they can reduce the likelihood of their estates owing a large amount in estate taxes after their passing.
Strategic gifting can be a valuable component of a comprehensive estate plan that aims to minimize tax obligations. Testators generally need to know two important limits when making gifting plans.
Annual gift tax exemptions
There are limits to how much property or cash one person can give another without incurring tax obligations. The Internal Revenue Service (IRS) adjusts that exemption annually.
In 2025, individuals can give up to $19,000 to each of their chosen beneficiaries. Married couples can gift twice that amount per beneficiary.
Particularly when people have large families and numerous beneficiaries, providing the maximum gifts allowed without incurring gift taxes can help reduce the overall value of the estate. The value of gifts depends on the fair market value of assets, and gifts above the exemption threshold may impact the giver’s annual tax return.
Lifetime gifting limits
There is a limit to the total amount of gifts a testator can pass to individuals during their lifetime. Currently, that threshold dovetails with the estate tax exemption threshold, allowing for a total amount of $13.99 million.
Discussing legacy goals and assets can help testators develop effective estate plans. Gifting can be part of a broader overall strategy that helps reduces tax liability and optimize what beneficiaries receive.