Address Tax Issues

The annual gift tax exclusion for 2025 is $19,000 per recipient (up from $18,000 in 2024). This means individuals can gift up to $19,000 per recipient, per year, without triggering gift taxes, needing to file a tax return, or using part of their lifetime gift & estate tax exclusion amount.

Considerations:
- Gifts in excess of the annual exclusion amount won’t necessarily be taxable, however they will begin to count towards an individual’s lifetime gift & estate tax exclusion amount.

- - Generally speaking, gifts in excess of the annual exclusion amount need to be reported on IRS tax form 709 - a tax advisor should be consulted to ensure proper filing for your particular situation.

- Married Couples Can Gift More: In 2025, couples can combine their exclusions to gift $38,000 per recipient annually without additional tax filing or lifetime gift & estate tax implications.

- Ideal for Incremental Wealth Transfer: This is a straightforward way to reduce your taxable estate over time, especially when gifting to children, grandchildren, or others.

- Gifts can include cash, securities, or tangible assets, but they must constitute a present interest (i.e., the recipient must have immediate access).

For 2025, the lifetime gift & estate tax exclusion amount is $13.99 million per individual (increased from $13.61 million in 2024). This unified gift & estate tax exclusion applies to both lifetime gifts and the value of assets passed upon death.
Considerations:
- Act Before the 2026 Sunset: If no legislative action is taken, the lifetime gift & estate tax exclusion amount is scheduled to revert to approximately $6.8 million per individual (adjusted for inflation) in 2026. High-net-worth individuals should strongly consider leveraging this historically high exclusion before it decreases.
- Large lifetime gifts can be particularly advantageous, especially for highly appreciating assets, as this removes both the gifted asset and its future growth from your taxable estate.
- For married couples, portability allows the unused portion of one spouse’s exclusion to transfer to the surviving spouse, effectively doubling the amount available (up to $27,980,000 in 2025).

The GST tax exemption also aligns with the $13,990,000 lifetime gift & estate tax exclusion amount in 2025. This allows individuals to transfer wealth directly to grandchildren or future generations without incurring the 40% GST tax.
Considerations:
- When used with certain trusts, this exemption can preserve wealth for multiple generations while avoiding transfer taxes at each generational level.
- Proper allocation of the GST exemption is critical to ensure that trusts avoid unnecessary tax exposure.

529 Education Savings Plans:
- Parents and grandparents can front-load (also known as “gift bunching”) a 529 plan by contributing up to five years’ worth of annual exclusion gifts at once without using your lifetime gift & estate tax exclusion amount. In 2025, this equals $95,000 per beneficiary for individuals and $190,000 for married couples.
- Investment growth in 529 plans is tax-free, and distributions for qualified education expenses are also tax-free.
Front-Loading Benefits:
- By taking advantage of the high annual exclusion limit, and ability to front-load (gift bunch) five years’ worth of gifts into a 529 at once, this means there will be more assets in the 529 growing tax-free for a longer period of time.

Irrevocable Life Insurance Trusts (ILITs):
- ILITs can be used to help remove life insurance proceeds from your taxable estate, providing liquidity for estate taxes or wealth transfer. Because the policy would be held in an irrevocable trust (outside of your estate), executed correctly, the proceeds of a life insurance policy held in an ILIT generally will not increase the taxable estate.
Grantor Retained Annuity Trusts (GRATs):
- GRATs allow you to transfer appreciating assets while minimizing gift taxes. Growth exceeding the IRS Section 7520 rate (currently 5.0% as of December 2024) passes to beneficiaries tax-free.
Charitable Remainder Trusts (CRTs):
- CRTs provide a way to reduce taxable income, secure an income stream for life, and ultimately benefit a charity, removing the remaining assets from your estate.

Family Limited Partnerships (FLPs):
- Transfer interests in family-owned businesses or investments at a discounted value due to lack of marketability or control.
- This strategy reduces the taxable value of the transferred assets, but it must be structured carefully to withstand IRS scrutiny. A tax advisor should be consulted before considering this strategy.
Step-Up in Basis vs. Gifting:
- Assets passed at death from non-retirement accounts (such as a Joint or Individual brokerage account) receive a step-up in basis, which resets the asset’s cost basis to its fair market value at the time of death, minimizing capital gains taxes for heirs.
- In contrast, gifting assets during life transfers your cost basis to the recipient (i.e., when gifting an asset before death, the cost basis “follows” from the person giving the asset to the person receiving it), potentially leading to higher capital gains tax when the recipient sells the asset.

There are currently 12 states and the District of Columbia that impose a state level estate tax. The most up-to-date information on estate taxes can be found here.
- Review your state’s tax laws, and consider domicile planning if you reside in a state with high estate tax exposure.

Lifetime Charitable Contributions:
- Direct gifts to qualified charities reduce the size of your taxable estate and may provide income tax deductions.
Charitable Lead Trusts (CLTs) or Charitable Remainder Trusts (CRTs):
- These trusts allow you to combine philanthropy with tax-efficient wealth transfer, benefiting both your heirs and your chosen charitable causes.

Leverage the $19,000 Annual Gift Exclusion: Incremental gifting is a simple way to reduce your taxable estate while providing financial support to loved ones.
Maximize the $13,990,000 Lifetime Gift & Estate Tax Exclusion Amount: Consider making substantial gifts or transferring appreciating assets to reduce the size of your taxable estate before the exclusion potentially drops in 2026.
Use Trusts for Tax Efficiency and Asset Protection: Trust structures offer long-term control, creditor protection, and tax efficiency for wealth transfer.
Plan Around State-Level Taxes: If applicable, incorporate strategies to mitigate exposure to state estate or inheritance taxes.
Incorporate Charitable Giving: Charitable strategies can reduce both your income tax liability during life and your estate tax burden at death.