What is a gifting strategy?

In addition to making gifts out of love and affection, some people choose to give assets away to ultimately reduce any estate tax which may be due. A gifting strategy is developing a plan on when, how, and which assets to gift in order to best minimize taxes without other negative implications.

Gifts that may be made to individuals include annual exclusion gifting (in 2022, the amount is $16,000 per recipient) and the payment of certain expenses to medical and educational institutions.

There are also various strategies to make gifts to charitable organizations. Many, many people engage in “checkbook gifting” which is making cash donations to favorite organizations. Other relatively straightforward strategies include gifting low-basis stock or making charitable gifts through your IRA distributions. Also, sophisticated gifting strategies accomplished through different types of trusts may be of tremendous value for certain clients

What is gifting estate planning?

Developing a gifting strategy may be an important part of the overall estate planning process for certain clients. Gifting is a way to make sure that a greater amount of your assets pass to your chosen beneficiaries, thereby minimizing estate tax that may be due.

Can an estate make a gift to an individual?

Yes, gifts may be made to individuals and charities through an estate.

What is the maximum gifting?

There is no legal limit on the maximum amount of gifting!

However, while it is not illegal to give away your assets, there are definite limits to gifting if you wish to avoid gift tax and/or benefit eligibility implications.

Many people are familiar with the “annual gift” limit. In 2022, anyone can give anyone else an amount up to $16,000 with no reporting obligation and no impact on your overall exemption amount.

Is there a tax on gifting?

A gift recipient is not subject to tax on the gift.

If a donor transfers an amount of assets that exceed the federal exemption amount, then the donor may have to pay a federal gift tax. The gift tax is coordinated with the estate tax, with a total exemption amount exceeding $12 million in 2022 (absent changes in the law, this amount is scheduled to decrease to $6.2 million at the end of 2025). Calculating and coordinating these amounts can be very complex. Accordingly, anyone concerned about the tax implications of gifting should consult with his/her accountant and accountant.

People will ask how will they know if we gift an assist.
Fraud is Fraud and if you are trying to say you didn’t do it, we would not advise a client to do that. In many instances there will be documentation of gifts, in instances where is no documentation, it is incumbent on the person, to be honest about the gifting they have done.

Should I establish 529 accounts for my grandchildren?

In many circumstances, a 529 account can be a wonderful way for a grandparent to make gifts to grandchildren. However, 529 plans may not be the best choice for you, and there are other options for saving for education expenses. So, before establishing any 529 accounts, I recommend that you review your options with your accountant, financial advisor, and your attorney.