Gifting in Life vs. After Death
In Florida the estate tax, commonly referred to as the “death tax,” will only affect the estates with a taxable value that exceeds the federal estate tax threshold. In 2024 the federal estate tax threshold sits at $13.61 million for individuals. This means that married couples will only have to worry about estate taxes if their estate is worth $27.22 million or more. Readers should bear in mind that the threshold is very often shifted. As recently as 2017, the amount to trigger estate tax was just under $5.5 million.
In that vein, the IRS has announced that the estate and gift tax exemption will be increasing in 2025 to $13.99 million per individual. The IRS further announced that the annual gift tax exclusion is increasing in 2025 to $19,000 per individual recipient.
As readers can see, the gifting and estate tax thresholds are ever in flux. This variability can be concerning from an estate planning perspective. While an estate might be exempt from estate tax in one year, it could be tipped into the taxable category the next year depending on how the policies change. The higher the estate is valued, the more at-risk it will be to fall into the taxable estate bracket. Due to the uncertain waters in this area, estate planners and experienced will & probate attorneys have many strategies at their disposal to help individuals strategically gift and reduce an estate prior to death. If done correctly, these strategies can be used to help individuals ensure they are minding all tax obligations, but reduce the cost of transfer to their intended beneficiaries and loved ones.
Gifting
One much-utilized tool is to gift property away annually during the testator’s lifetime. An Individual is allowed to gift away a set amount of money/property every year without triggering tax consequences. Just as the threshold for estate tax shifts frequently, the threshold for the amount that may be gifted in a given year without triggering tax consequences is subject to change. The federal government sets an annual exclusion threshold – as mentioned above, in 2025 that amount is set to be $19,000 a year per recipient. What this means, in practice, is that a taxable estate can be diminished by the owner gifting up to $19,000 per individual. A grandmother could gift, for example, $15,000 dollars each to her ten grandchildren each year during the holidays. Because each individual receives the gift less than $19,000 the gifted money would not be subject to gift tax. And because the money was gifted, it is no longer counted as part of the grandmother’s estate. Therefore, estate tax would not apply upon the grandmother’s death.
Gift Tax and Estate Tax
If a donor does gift an individual an amount that exceeds the set annual threshold, a gift tax is triggered. For estate planning purposes, individuals can carefully gift away portions of their estate and effectively keep their estate below a given years’ estate tax threshold.
Contact Suncoast Civil Law
What property is best left to pass through wills & probate, vs which property is most advantageous to be gifted during life, can be a complicated path. There are many issues to consider, such as how the property appreciates in value, that should inform your decision. The experienced Sarasota will & probate and probate litigation attorneys at Suncoast Civil Law can help with your questions and estate planning needs. Contact our office today to begin discussing your next steps forward.
Sources:
morganlewis.com/pubs/2024/10/irs-announces-increased-gift-and-estate-tax-exemption-amounts-for-2025
cnn.com/2024/11/06/politics/heres-what-trump-is-proposing-for-the-economy/index.html