Annual and lifetime gifting limits for estate planning

On Behalf of | Feb 5, 2024 | Estate Planning

In the United States, the Internal Revenue Service (IRS) sets annual gifting limits, which dictate the amount of money or value of gifts one can give another person within a year without needing to file a gift tax return. As financial laws and thresholds are subject to change, staying informed about these limits is crucial for effective financial planning and estate management.

Understanding and leveraging gifting limits can be pivotal in estate planning and wealth transfer strategies. By effectively using the annual exclusion and being mindful of the lifetime exemption, individuals can significantly reduce their potential estate tax liability while supporting their family and friends.

Annual exclusion

As of 2024, the annual limit is $18,000 per person, which is the maximum value an individual can gift to another person within a year without counting towards the lifetime gift tax exemption or necessitating a gift tax return filing. Gifts that exceed this annual threshold must be reported to the IRS, although they may not necessarily result in a tax liability due to the lifetime exemption.

The annual exclusion applies to gifts to each recipient, meaning an individual can give up to this limit to as many people as they wish within the same year. A married couple can gift up to $36,000 to a single recipient.

Lifetime gift tax exemption

In addition to the annual exclusion, there is a lifetime gift tax exemption. This exemption covers the amount an individual can give away over their lifetime, beyond the annual exclusion amounts, without incurring gift tax. The lifetime exemption for 2024 is $13.61 million. Any gift amounts that exceed the annual exclusion will count against this lifetime exemption.

As this issue is complex, working with professionals to navigate these rules effectively and tailor a gifting strategy that aligns with one’s financial goals and tax situation is advisable.



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