Should You Have a Gifting Strategy as Part of Your Estate Plan?

Nobody wants to pay more in taxes than they are legally required to.

So, it makes sense for retirees and others who are planning for the dispensation of their estate to take advantage of every available tool to reduce their tax burden, so that family, friends, and organizations are able to benefit maximally from a lifetime of your hard work.

Gifting is one of the simplest, yet most effective ways of doing so.

Estate planning IS tax planning.

We usually don’t think of estate planning in that way, but it is true:  without an estate plan which includes a clear last will and testament, the government will maximize their claim on the assets of a deceased’s estate.

So an estate plan is really a way of checking the government’s power over the assets you’ve accumulated over the course of your life.

Tax rules, Abbreviated.

While the tax code is a labyrinthine tangle of rules and regulations, there are three elements, easy to understand, which must guide any and all estate planning activities: 

  1. Estate taxes. The federal government will exempt from estate taxes the first $5.49 million of an estate’s value (for 2017). Estates whose value exceeds this threshold are taxed on a sliding scale, from 18% for taxable estates of $10,000, up to 40% for those taxable estates of $1 million or more.

    And we’re not just talking about cash and investments – the value of property both real and personal, counts towards the value of the estate.

    Know that the estate can be transferred to a spouse in its entirety, tax-free (so long as the spouse is a U.S. citizen).

  2. Gift taxes. Individuals can gift up to $14,000 per year ($28,000 for couples) without incurring any taxes. For beneficiaries, there’s a lifetime $1 million gift exemption.

    There is no limit on the number of beneficiaries, either. You can gift $14,000 per year to 100 people or organizations if you wish.

  3. Kiddie Tax.  The IRS has rules which limit just how much unearned income can be gifted to a child under age 18. A registered investment advisor (RIA) can help to find ways to reduce the kiddie tax in certain instances.

Gifting as a core estate planning strategy.

(From here on out, our presumption is that you have assets you would like to pass along, and want the government to get as little of them as possible.)

The most powerful reason for gifting is: When assets are gifted, the value of the estate is reduced by that amount. In essence, you are taking assets and passing them along to your beneficiaries, tax-free. At the same time, you are reducing the value of your estate, and thus subjecting it to a lower tax rate.


  • If your total estate amount is less than $5.43 million, gifting as a strategy for reducing your estate taxes isn’t necessary, as it all falls below the exemption limit.
  • Make sure you’re not giving away so much that your own financial security is compromised. Be extremely conservative.
  • This is but an overview of the topic of gifting. There are other strategies, vehicles, and considerations that should be taken into account, depending in the complexity of the estate and the degree of planning required.

Certified Financial Planner or CPA can help investors with any size estate to plan for a seamless, hassle-free dispensation of an estate’s assets, both as gifts as well as an inheritance.

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