Gift & Tax Strategies

Posted on December 30, 2025

UTILIZE ANNUAL AND LIFETIME EXCLUSIONS

Gift tax strategies aim to reduce your overall taxable estate and help beneficiaries receive wealth with minimal tax consequences, using available exclusions and specific gifting methods:

Annual Gift Tax Exclusion : As per IRS, you can gift upto a specific amount per person each year without filing a gift tax return or using your lifetime exemption.

For 2025 and 2026, this limit is $19,000 per recipient, per year.

Married Couples : They can combine their exclusions to gift up to $38,000 per recipient annually by gift-splitting, which requires filing IRS Form 709 to document consent.

To avoid exceeding the annual limit on a large gift, we can structure the gift payments over multiple years.

Lifetime Gift & Estate Tax Exemption : We have to remember that all gifts that exceed the annual exclusion count against your total lifetime exemption. In 2025, this is $13.99 million per individual, increasing to $15 million in 2026. Tax is only due when the total cumulative lifetime gifts and estate value exceed this large amount. Using this exemption during your lifetime can remove further appreciation of the gifted assets from your taxable estate.

Strategic Asset Gifting

Gifting Appreciated Assets: If we consider gifting assets which are expected to appreciate in value, for example, stocks or real estate, it can prove to be a powerful strategy because all future appreciation occurs outside of your estate, reducing potential estate taxes. The recipient will assume your original cost basis and may owe capital gains tax when they actually sell the asset.

Inter-Family Loans: Another strategy is to provide a loan with a low, IRS-mandated interest rate, rather than a direct large gift.

Making Direct Payments for Qualified Expenses: Certain payments are not considered taxable gifts and do not count against your annual or lifetime exclusions, regardless of the amount- Example as below:

• Qualified Medical Expenses where payments are made directly to a medical provider or insurance company on behalf of somebody else, are considered tax-free gifts.
• Qualified Educational Expenses: Payments made directly to an educational institution for tuition are exempt from gift tax, irrespective of the school grade or college.

Use Specialized Accounts and Trusts

• 529 College Savings Plans: You can make one-time contribution, upto five years' worth of annual exclusion ($95,000 for single filers; $190,000 for married couples) into a 529 Plan. Earnings in this 529 Plan, grow tax-deferred and withdrawals for qualified education expenses are tax-free.
• Trusts: Irrevocable trusts can be used to transfer assets out of your estate while providing guidelines on how and when beneficiaries receive the funds.
• Charitable Giving: Gifts and donations to qualified charities can reduce your taxable estate and provide potential income or capital gains tax benefits. Example include options, such as, direct donations or establishing charitable remainder trusts.