Leveraging the annual gift tax exclusion is one of the best opportunities to maximize your estate planning strategy. This allows you to gift a certain amount to people every single year without triggering an additional gift tax or gift tax return.
In 2024, that amount is $18,000. You can give $18,000 per person each year without leading to additional filing or tax burdens, and married couples can gift together for a total of $36,000. If you go over this amount, however, you may be required to file a gift tax return and any amount in excess could be applied towards your lifetime gift exclusion instead.
Leveraging the annual gift tax exclusion first is very beneficial for estate planning strategies because it triggers no impact to the estate tax exemption. If you suspect that your total estate may be subject to the estate tax, you could be saving up to 40% on those gifts you make using the annual gift tax exclusion. If you can leverage this exclusion every single year, this is the best-case scenario. Further, if you wish to incorporate giving into your estate planning strategy, you may also choose to contribute to a 529 college savings plan, which allows someone making a gift to combine five years of gifting into one, meaning that you could set aside up to $90,000 and then spread that exclusion over five years. This would help a beneficiary with their college and graduation expenses.
As we come up on about halfway through the year, there is still plenty of time to take advantage of gifting plans for your loved ones. You can even figure out how this fits into your bigger estate plan by working with the right team of financial professionals and attorneys.
For more assistance on learning how to leverage this strategy properly, communicate with our Pasadena estate planning law firm.
