{"id":80462,"date":"2024-10-16T06:50:00","date_gmt":"2024-10-16T11:50:00","guid":{"rendered":"https:\/\/www.success.com\/?p=80462"},"modified":"2024-12-17T15:09:16","modified_gmt":"2024-12-17T21:09:16","slug":"estate-planning-maximize-gift-tax-exemptions","status":"publish","type":"post","link":"https:\/\/www.success.com\/estate-planning-maximize-gift-tax-exemptions\/","title":{"rendered":"Gift and Estate Taxes: Should I Start Giving My Kids Their Inheritance Now?"},"content":{"rendered":"\n

As with past election years, 2024 has thus far been full of promises and threats from both sides of the political aisle. Taxes are always a common topic but have recently proven to be especially concerning as conversations arise about capital gains and estate tax changes. <\/p>\n\n\n\n

Regardless of who wins the presidency in November, a tax strategy is a key element of planning your estate<\/a> for your loved ones. One strategy to consider is gifting some of your estate before your death to take advantage of certain tax benefits. Read on to learn how this works and whether giving away your assets early is a good idea. <\/p>\n\n\n\n

Current tax provisions for your estate<\/h2>\n\n\n\n

The only guarantees in life are death and taxes\u2014or so they say. You pay taxes when you earn, spend and give money to your loved ones after your death, assuming your estate is large enough to be taxable.<\/p>\n\n\n\n

Currently, the IRS offers two provisions to limit the estate taxes your heirs must pay after you die: the gift tax exclusion and the estate tax exclusion. Together, these provisions make up the unified tax credit. Here\u2019s how they work: <\/p>\n\n\n\n

Gift tax exclusion<\/h3>\n\n\n\n

As of 2024, individuals can give up to $18,000 to any other person per year without reporting it to the IRS or it counting against the gifter\u2019s lifetime estate exemption. This means that you could give up to $18,000 in cash or equivalent gifts to as many people as you want each year. Your spouse can do the same with their own individual limit. <\/p>\n\n\n\n

Estate tax exemption<\/h3>\n\n\n\n

You also have a basic estate tax exclusion of $13,610,000<\/a> in 2024. This means that your heirs won\u2019t pay any estate taxes\u2014which currently top out at 40%<\/a>\u2014on assets transferred after your death as long as the total doesn\u2019t exceed that limit. This includes everything that you pass on to your beneficiaries, including your real estate property, investment portfolio<\/a>, savings accounts, retirement accounts, valuables and more. <\/p>\n\n\n\n\"SUCCESS+<\/a>\n\n\n\n

Concerns with current estate tax laws<\/h2>\n\n\n\n

The biggest worry with today\u2019s estate tax provisions is that they are set to change at the end of 2025, and they may continue to drop in the years that follow.<\/p>\n\n\n\n

In 2017, President Trump passed the Tax Cuts and Jobs Act (TCJA). This bill provided a number of changes to the estate and gift tax exclusion limits, including doubling the basic exclusion amount for tax years 2018\u20132025.<\/p>\n\n\n\n

Thanks to this, the federal lifetime gift tax exemption for each individual<\/a> jumped from just $5.49 million in 2017 to $11.18 million in 2018 (and now $13.61 million in 2024). This excludes any gifts you give away while you\u2019re still alive, up to $18,000 per year per individual.<\/p>\n\n\n\n

Yes, that may seem like a large number. In fact, less than 1% of beneficiaries paid any estate tax in 2022, according to the Census Bureau. However, these temporarily elevated limits expire next year. If you were to pass away on or after Jan. 1, 2026, your estate tax exemption would be about half what it is today with the current laws in place. After adjustments for inflation, the exemption is expected to be around $7 million for 2026 and beyond.<\/p>\n\n\n\n

This is where politics comes into play, especially during an election year. If Donald Trump wins the White House again, it stands to reason that he might extend the TCJA exemption limits into 2026 and further.<\/p>\n\n\n\n

If Kamala Harris were to win, however, it\u2019s highly unlikely that we would see any substantial increase in these limits while she\u2019s in office. She was an outspoken critic of the TCJA when it was first passed and even advocated for policies that would reverse many of its intended effects. She has also suggested eliminating the step-up basis and introducing taxes on unrealized gains, which could result in your beneficiaries paying more than you might expect in taxes\u2014and potentially selling off your assets to cover that IRS bill\u2014when you die.<\/p>\n\n\n\n

Giving away your estate early<\/h2>\n\n\n\n

If you have a valuable estate, you might worry that impending tax changes could cut into your beneficiaries\u2019 inheritance. While it\u2019s hard to know exactly what tax changes the future holds, regardless of the election outcome, there is one option to consider: parsing out some of your assets while you\u2019re still alive.<\/p>\n\n\n\n

This could include:<\/p>\n\n\n\n