Key Takeaways:
Even if you can legally use a DIY will or trust, estate planning is complex enough that working with an experienced estate attorney is usually the safer path.
In 2025, the annual gift exclusion is $19,000 per person ($38,000 per couple), and amounts above that typically just require filing Form 709 while drawing down your much larger lifetime exemption.
Smart gifting can reduce your taxable estate, but choices like gifting appreciated assets, real estate, or business interests can create unintended tax issues, so coordination with your tax and legal advisors matters.
An estate plan is integral to the financial planning process. It is conceived to carry out your wishes upon death.
Some folks choose DIY, or do-it-yourself wills or trusts. Ultimately, it is your choice, but given the complexity of estate planning, we strongly recommend that you seek guidance from an attorney.
An attorney who specializes in estate planning can lead you through the process and draw up plans that will establish the appropriate strategy for you.
As a part of the process, we will discuss gift taxes and gift giving. Estate planning and gift tax rules are complicated, and this will be a high-level overview. Please consider consulting your attorney or tax advisor for any questions.
Under the current law, the lifetime exemption for gift and estate taxes in 2025 is $13,990,000 for individuals and $27,980,000 per married couple.
The annual gift-tax exemption in 2025 is $19,000 per donor. The recipient may be your child, a relative, or a stranger.
This means that a giver can give someone a gift that is valued up to $19,000 in a calendar year, and the giver will pay no federal gift taxes. If the gift comes from a couple, the limit doubles to $38,000. Even then, if you exceed the thresholds, it's unlikely you will owe federal taxes on your gift, as we'll explain in a moment.
Please note that in 2019, the IRS clarified that individuals taking advantage of the increased gift tax exclusion in effect from 2018 to 2025 will not be adversely impacted after 2025, when the exclusion amount is scheduled to drop to pre-2018 levels.
Because it is a gift, the recipient owes no federal income tax. However, the giver will not receive a tax deduction for the gift. Gifts to a qualified charity may be tax-deductible and are not subject to gift tax limits.
What if your gift exceeds the prescribed limit? Do you, the giver, owe a gift tax? The short answer is probably not.
You see, the annual limit is also applied to the lifetime exemption of $13,990,000 per person and $27,980,000 for a couple (for 2025).
For example, if Mom gives a $20,000 gift in 2025 to her daughter, Mom exceeds the $19,000 annual limit by $1,000. Taxes can still be avoided. However, Mom would be required to file U.S. Gift Tax (and Generation-Skipping Transfer) Form 709 with the IRS.
You may avoid the gift tax unless you top the lifetime exemption.
If you exceed the lifetime exemption, the gift tax rate ranges from 18% to 40%. Beware of exceptions and rules for calculating the tax. If you are running up against the limit, please consider talking to your tax professional.
What gifts are excluded?
- Gifts that are not more than the annual exclusion for the calendar year.
- Tuition or medical expenses you pay for someone.
- Gifts to your spouse.
- Gifts to a political organization for its use.
- Gifts to qualified charities.
7 Gifting Strategies
- Give extra. If you are wealthy and won't need the assets, consider giving above the annual exclusion. While you will file a gift tax form with the IRS, you may rely on your large lifetime exemption.
- Give assets that are appreciating, as these assets remove any future appreciation from the estate. But beware of taxes. When received as a gift, the recipient will usually receive the cost basis of the donor. If the recipient sells, the assets will be taxed on the appreciation as a capital gain. If the gift is inherited, the tax basis will increase to the current value, potentially reducing taxes if the asset is sold.
- Gift assets from joint owners. This doubles the amount of the gift without running up against the annual exclusion.
- Spread out the gifts over several years. Recipients get all that you want to give them, just over a longer period of time.
- Paying for tuition or medical expenses avoids the annual limit. But they must be paid directly to the institution, not the recipient.
- Be careful. Speak with your attorney or tax advisor if your assets include real estate or business holdings that could generate unwanted tax liabilities without proper planning.
- Playing the lottery? Think ahead. Finally, on the outside chance you win the lottery and you decide to share your winnings with siblings, your generosity is commendable. But it's probably best that you buy the ticket jointly with your siblings or have some type of partnership agreement in place before the winning ticket is purchased. If not, the gift tax could take a big bite of your windfall.
I trust you've found this review to be educational and insightful. If you have any questions or would like to discuss our wealth management services, please feel free to contact us.
As always, thank you for the trust, confidence, and the opportunity to serve as your financial advisor.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Albany Financial Group and LPL Financial do not provide tax or legal advice or services. Please consult your tax or legal advisor regarding your specific situation.
John Gigliello, CFP®
John Gigliello, CFP®, is a fee-based fiduciary financial planner in Albany, NY, serving individuals age 50+ with comprehensive planning and investment management, centered around proactive and advanced tax planning. John earned a Certificate in Financial Planning from Boston University and, more recently, successfully completed the rigorous CFP® Certification examination to become a CERTIFIED FINANCIAL PLANNER™. John earned the Accredited Investment Fiduciary® Designation from the Center for Fiduciary Studies®, the standards-setting body for Fi360. The AIF® designation signifies specialized knowledge of fiduciary responsibility and the ability to implement policies and procedures that meet a defined standard of care. John currently serves on the Albany County Investment Advisory Board, having been appointed by a unanimous vote of the County Legislature in January 2019. In this position, John advises the county on a strategy for making the best use of money available for investment.