It’s gift season, and I’m not talking about cozy slippers or a new laptops. As an estate planning attorney, while I think about those kinds of gifts, I also think of gifting to heirs. That is sharing your assets with your loved ones BEFORE you have passed. And why not? They say the joy is in the giving. One can receive enormous pleasure from giving an adult child a bit of financial boost when they need it, whether that is helping with a down payment on their first home or even buying your deserving grandchild their first car to commute to school or work. Why make them wait? If you are thinking along the same lines, the following are some tips regarding limits for 2024.
First, from Kelley R. Taylor’s recent article in Kiplinger,
“For 2024, the annual gift tax limit is $18,000. (That’s up $1,000 from last year’s limit since the gift tax is one of many tax amounts adjusted annually for inflation. For married couples, the combined 2024 limit is $36,000.
For example, if you are married and have two married children and two grandchildren, you and your spouse can give up to $36,000 to each of your kids, their spouses, and the grandchildren in 2024 without having to file a gift tax return or pay any tax. This means you can give a total of $216,000 in tax-free gifts or whatever sum under that total you are comfortable giving.
Giving assets to heirs as end-of-year gifts can be a tax-efficient way to transfer wealth and reduce your taxable estate. Here are some key points to consider:
- For 2024, the lifetime gift tax exemption is $13.61 million, up from $12.92 million in 2023.
- And it is good to know that paying tuition directly to a school is not considered a taxable gift. Neither are payments made directly to a healthcare provider, medical institution, or medical insurance company for someone’s benefit.
I imagine some of you may already be thinking about how you can help a loved one without impacting your annual or lifetime limit. So, if you are, please get in touch with your financial advisor or CPA right away. 2024 will be gone before you know it. If I can be of service to you with your estate planning needs related to gifting or other topics, please do not hesitate to call or email me. I look forward to hearing from you.
Best wishes for a happy holiday season and New Year!
David