When should I consider lifetime gifts?


Lifetime gifts should be considered when we want to reduce our overall estate, and making the gift won’t severely impact the donor’s lifestyle. Now, there are two types of gifts, of course. There’s the annual exclusion gift, which is currently $14,000 a year. It’s an index number. It could be increased in later years when the Treasury and the IRS determine that inflation warrants increasing that increase. There’s also our lifetime gift tax exemption of 5.49 million dollars. Now, that can be cash; that can be interest in property; it can be interest in businesses. But, the most important thing to consider is will this gift severely impact, negatively impact, the donor. If it does, I never encourage a client to make that gift.

Note: The Tax Cut and Jobs Act of 2017 signed into law in December 2017 increased the exemption amounts mentioned in these videos. The personal estate, gift, and generation-skipping tax lifetime exemption was increased to $11.18 million per person. The annual gift tax exclusion was increased to $15,000 per donee per year.

Both amounts are indexed for inflation and may increase year over year until December 31, 2025, when the law sunsets and reverts to 2017 values.