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Gifting with Tax Purposes in Mind

November 25, 2020

In addition to the emotional high that giving to those you care about brings, giving can now also be a savvy tax move for families with substantial wealth. That’s because both the present value and any potential growth of the transferred assets are removed from your taxable estate.

Although the IRS generally doesn’t care when you make a major gift, the timing can make a big difference to your heirs. Giving a smaller amount when your heirs need it, and while you're still alive, can be more meaningful than waiting to pass on a larger amount after you're gone.

The combined lifetime estate and gift tax exemption is $11.58 million per individual and $23.16 million per couple, and the annual gift exclusion amount is $15,000.

Gift Tax Strategies:

  1. The annual $15,000 gift exclusion is separate from the lifetime gift and estate tax exemption. And because annual gifts reduce the size of your estate, they reduce the potential tax liability for your heirs. Further, if you’re married you can “gift split” which means each spouse can gift $15,000 for a total of $30,000.
  2. Pay the medical bills for another individual. Medical care includes expenses incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for transportation primarily for and essential to medical care. Medical care also includes amounts paid for medical insurance on behalf of any individual.
  3. Pay the tuition bills of a student. Does not include books, supplies, room and board, or other similar expenses that are not direct tuition costs. You’re allowed to bundle five years’ worth of $15,000 gift tax exemptions into an initial $75,000 contribution to one student’s 529.
  4. Donating to a charitable giving vehicle such as a donor-advised fund, private foundation, charitable remainder trust, or pooled income fund offers several obvious benefits. The donations are tax deductible; they can grow tax-free; you can donate appreciated assets and avoid capital gains tax; and donations are free of gift and estate taxes.

 Gifting is common during the holiday season so now is the time to consider how a giving strategy fits in with your overall investment plan, and to determine whether it makes sense for you to give now or later. We have answers so email or call us today.


This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results.  Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.

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