While federal estate tax limits are high, families with high net worth and high value assets may be subject to a federal estate tax. Often, comprehensive estate plans include making periodic or annual gifts to children. This can help to reduce the amount of the taxable estate and allow your children to enjoy assets before you pass away. How much can you gift a child each year before it’s subject to a gift tax?
As of 2023, you can gift up to $17,000 per person, per year before you begin reducing the unified credit, which is the amount of assets you can give away during life or upon death to those other than your spouse. The amount a person can gift to others without reducing the unified credit may vary year to year, so it’s important to check in with an attorney if you are concerned about this issue. You can work with a Dworken & Bernstein estate planning attorney to make sure you’re making smart choices.
Why make gifts now?
Keep in mind that federal estate tax considerations are generally for people with estates worth more than $12.92 million for a single person in 2023. If your estate is worth less than that when you pass away, it will not be subject to tax.
However, if your estate is worth more than $12.92 million as a single person, or $25.84 million as a married couple, it may behoove you to gift some of your estate annually until you are able to fall below the gift tax threshold.
Are there other options?
If you’d like to reduce the taxable amount of your estate, there are several options:
- Education and Medical gifts: You may make direct gifts for tuition or medical expenses.
- 529 plans: 529 plans help save for college, and contributions will help reduce your taxable estate.
- Gifts that Freeze Value: A gift is valued at the time it happens, so you can limit the amount of a gift by giving it earlier.
- More Complex options: An estate planning attorney can provide you with other options.
The best way to find out which gift options are available to you is to work with a Dworken & Bernstein estate planning attorney. Whatever your estate planning goals, we can help ensure your assets are protected and your loved ones are provided for. Call today to learn more.
