An annual gifting plan that transfers wealth tax-free.

By Tresp, Day & Associates · November 10, 2020

Estate planning often focuses on trusts and documents, but plain gifting is a quietly powerful strategy. Used consistently, the annual exclusion transfers meaningful wealth tax-free and shrinks a taxable estate over time.

How the annual exclusion works

Each year you can give up to the annual exclusion amount to any individual, and to any number of individuals, with no gift tax and without touching your lifetime gift/estate-tax exemption. A married couple can combine their exclusions to give twice as much per recipient. (The exact amount is adjusted periodically for inflation; confirm the current figure.)

The compounding effect

The power is in repetition and breadth. Gifting to several children and grandchildren, every year, adds up quickly, and because the gifted assets leave your estate, so does all of their future appreciation. Over a decade or two, a disciplined plan can transfer a large share of an estate tax-free.

Gift smart, not just generously

Gifts can be made into trusts to keep them protected from a recipient’s creditors and divorces, and coordinated with education and medical exclusions (which are unlimited if paid directly). Tresp, Day & Associates helps families design gifting into a broader estate and protection plan. Coordinate specifics with your tax advisor.