![]() Having decided to take advantage of the expanded exclusion amount, determine whether the value of the gifts is substantial enough to make best use of this unique opportunity. Ĭonsiderations in Light of Impending Exclusion ReductionĪssuming the benefits of gifting now outweigh the potential drawbacks, and an individual or family is in a position to make significant gifts, the taxpayer should keep the following in mind when determining how much (and how) to gift before this window of opportunity closes. Loss of the date of death (or alternate valuation date) tax-cost basis adjustment to fair market value that would otherwise be available upon the donor’s death. The recipient can benefit from the gift now rather than in the future after the donor dies. The donor’s loss of access to the gifted asset and its income and The donor can use the gift event as a way to pass on experience and wisdom to increase the recipient’s financial acumen and experience and The donor’s loss of control over the transferred assets The post-gift appreciation on the gifted assets escapes federal estate tax and possible state or inheritance tax upon the donor’s death ![]() Potential disadvantages of gifting now include: Potential benefits of gifting now include: A discussion with your tax, legal, and financial advisors can help you decide what is right for you and your family. Determining whether to make substantial gifts to future generations is a complex decision and is dependent on a number of factors.įor many, thoughtful planning can capture many of the advantages of lifetime gifting while minimizing the impact of potential disadvantages, such as the few pros and cons of gifting that are highlighted in the graphic above. Yet lifetime gifting is a balancing act, where the benefits of making gifts today should outweigh the potential disadvantages. To Gift or Not to Gift?įor individuals and families who wish to pass assets to children, grandchildren, and (perhaps) more distant descendants as part of their overall wealth transfer plan, gifting now, rather than later, could provide significant benefits to the family. If today’s elevated inflation rates continue for the next three years, it is possible that the exclusion amount in 2026 could be approximately $8 million per person. Although the exclusion amount in 2026 had been projected to be approximately $6.4 million, increased inflation may render that estimate obsolete. Beginning January 1, 2026, the exclusion amount will be decreased to $5 million, indexed for inflation. ![]() Assuming no changes, the current exclusion amount (as further adjusted for inflation) is set to expire on December 31, 2025. This increased gifting capacity is not permanent. For individuals and families willing and able to make significant gifts, this represents an unprecedented opportunity to transfer assets to younger generations at a much-reduced transfer tax cost. The exclusion amount is indexed for inflation and for 2023 is $12.92 million per person ($25.84 million for a married couple) and is subject to further adjustment for inflation through 2025. The Tax Cuts and Jobs Act of 2017 (TCJA) created a significant opportunity to tax-efficiently transfer wealth to the next generation and beyond, effectively doubling the gift and estate tax exclusion and the generation-skipping transfer tax exclusion from the limits in effect in 2017. We suggest that you discuss these recommendations with your legal and tax advisors.
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