Gifts of Money
Planning monetary gifts carefully can help minimize possible gift tax, estate tax, and income tax consequences and maximize potential tax benefits.
In 2024, gift, estate and generation skipping transfer (GST) tax exemptions increased to $13.61 million per individual. Higher exemptions mean that individuals can gift more to family members or other beneficiaries, thereby reducing the tax burden on their estate.
The 2024 annual gift tax exclusion is $18,000 per person, which means that a parent or grandparent can give children and grandchildren up to $18,000 per individual recipient without needing to file a gift tax return. Annual gifts over the $18,000 exclusion amount will require filing a gift tax return, but no gift tax will be due unless your total lifetime gifts exceed the current $13.61 million cap on tax exemptions.
Gifts to College Savings
In addition to giving cash gifts, you can use your annual gift tax exclusion of $18,000 per person to fund future education expenses. 529 Plans have become the saving method of choice because of the significant tax benefits the government provides for these plans. Contributions to a 529 account may help reduce the taxable value of your estate.
In Georgia, you can make a lump sum gift of $90,000 for single filers or $180,000 for joint filers and pro-rate the gift over five years, which amounts to $18,000 per year. Gifts to a 529 Plan also may be eligible for the Georgia state income tax deduction.
As an alternative, the IRS allows you to directly pay for a child’s tuition expenses without it counting against your lifetime gift and estate tax limits, if the payment is made directly to the educational institution. Such gifts also reduce the taxable value of your estate.
Gifts Made in Trusts
Now may also be a great time to consider putting money in a living trust for loved ones’ future use. If you’re concerned about spoiling the kids or about their future behaviors, “incentive trust” type provisions can require a beneficiary to reach certain milestones before benefits are paid out. For example, “incentive” provisions could include distributing a certain dollar amount to a beneficiary who graduates with a four-year college degree, gets married, or becomes a parent.
If you’re looking for an Atlanta-area estate planning attorney who can provide expert counsel on making gifts and how to manage estate and gift taxes, please call us at 678-720-0750 or email us at info@MorganDiSalvo.com to set up an estate planning consultation.
