As a part of your estate plan, something you may be interested in is giving gifts to those you love. If you do so correctly, you can prevent taxation and even reduce the value of your estate to prevent estate taxes in the future.
Taxpayers are supposed to keep track of any gifts they make throughout their lifetimes. While you probably won’t remember every gift you give, if you do give a large gift, then it’s important to claim it appropriately. So long as you keep the value of your gift under the limits set by law, you can avoid taxation as well.
Every year, you have the opportunity to use the annual gift tax exclusion to give gifts without being taxed. In 2020, the total amount you can give to a single person is $15,000. If you’re married, then you, as a couple, can give up to $30,000 to a single person. The key is that you can give up to that amount to each person to whom you want to provide a gift.
So, if you have a child to whom you’d like to gift a large sum of money for a wedding or event, you can give that money to them as well as to their potential spouse, for example.
So long as you don’t exceed that $15,000 limit, your gift won’t be taxed. Remember, you can give that amount each year, so you can also potentially give a gift of $15,000 on the last day of the year and $15,000 on the first day of the next year.
Giving gifts is a good way to reduce your estate’s value. Our site has more on taxation and how to prevent taxes on the gifts you give.