estate planning gift taxes

Understanding gifting strategies is an important aspect of estate planning. Determining when and how to gift assets to reduce potential estate taxes can be critical in meeting your legacy goals. An important consideration is the federal estate tax exemption. Effective January 1, 2016, the unified credit for estate and gift taxes has been raised so that the tax applies only to estates greater than $5.45 million. And because the estate tax exclusion is portable, if you and your spouse have combined estates that do not exceed $10.9 million, you may be able to avoid the estate tax without the necessity of including language in your will creating a bypass trust.

The unified credit applies to gifts given with a future interest, meaning the gift cannot be used until your death, and it is included in your unified gift and estate tax credit. The most common example of this is through the use of an irrevocable trust.

On the other hand, a present interest gift is one given outright to a person. The amount of a present interest gift is not added into your total lifetime unified gift and estate tax credit. The annual gift tax exclusion for 2016 for a present interest gift remains at $14,000 per person. Therefore, if you are married, you can gift up to $28,000 per recipient this year without any federal gift tax ramifications by using the gift-splitting rules. However, with the rise in the federal estate tax exemption you may not need to use the annual gift exclusion to whittle down your estate unless you live in a state (or the District of Columbia), that imposes separate state death tax levies.

Sound complicated? It can be. While gifting can be a good way to reduce your taxable estate and may be an important element of your estate plan, it’s critical to understand all of the tax implications, including laws that vary by state.

Contact Investment Services to discuss the many ways we can assist you in identifying and implementing strategies to help minimize taxes and optimize your legacy. We’re also happy to meet with any friends or family members you feel would benefit from our assistance.


This information is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.

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