When it comes to gifting strategies in 2025, it’s essential to understand the current limits and rules to avoid taxes and protect your estate. The federal annual gift tax exclusion is $19,000 per recipient in 2025, up from $18,000 in 2024. This means you can give up to $19,000 to as many people as you want without incurring any federal gift tax. Florida has no state gift tax, so Florida residents only need to worry about the federal limits.
Most common large financial gifts
Many people aim to help their children or loved ones by providing financial support to cover significant expenses. These can include:
- Education costs: College tuition and other educational expenses are substantial and often a priority for parents and grandparents.
- Housing: Helping with a down payment on a house or even gifting a property can provide a significant financial boost.
- Medical expenses: Covering medical bills or long-term care costs can be a considerable relief for family members.
- Weddings and major life events: Contributing to weddings or other significant events can create lasting memories and reduce financial stress.
These big, life-changing milestones often require the biggest investment of money. Financially support through these times can be impactful but must be implemented with consideration of their legal impact.
Some tax exemptions may sunset at the end of 2025
The future of tax exemptions is uncertain, making it crucial to plan ahead. The Tax Cuts and Jobs Act of 2017 significantly increased the lifetime gift and estate tax exemption, which is $13.99 million per person in 2025. However, this exemption is set to sunset at the end of 2025, potentially reducing the exemption from $13.99 million to around $7 million per person in 2026. This change could significantly impact estate planning strategies, making it essential to review and possibly adjust your plans before the exemption decreases. By making large gifts now, you can take advantage of the higher exemption and reduce the taxable value of your estate.
Estate planning gifting strategies
Estate planning tools can help you give to your family while protecting their inheritance and allowing you to avoid excess taxation. Here are some key strategies:
- Trusts: Trusts allow you to set aside assets for your beneficiaries, providing control over how and when to distribute assets. They can also help reduce estate taxes and avoid probate.
- Wills: A will is a legal document outlining how you want your assets distributed after death. It ensures your wishes are followed and can help avoid family disputes.
- Real estate: Gifting real estate can be a valuable way to transfer wealth. To manage tax implications, you can use strategies like joint ownership or placing the property in a trust.
- Valuable collections: If the value of items like art, antiques and jewelry is within the annual exclusion limit, they can be gifted without incurring taxes.
- Lifetime gifts: Making gifts over your lifetime can reduce the size of your estate and potentially lower estate taxes. The annual gift tax exclusion allows you to give up to $19,000 per recipient tax-free yearly.
Other arrangements may be needed and can be coordinated on a personal basis to meet the specific needs and wishes of the person planning their estate.
Setting aside finances for education expenses
One effective arrangement that is more nuanced than general gifting strategies is to set aside finances for education expenses is through a 529 plan. A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. Contributions to a 529 plan grow tax-deferred, and withdrawals for qualified education expenses are tax-free. Qualified expenses include tuition, fees, books, supplies, room and board for college, and up to $10,000 per year for K-12 tuition.
Consult with an Orlando estate law attorney
Given the complexities of gifting and the amounts of money it can involve, it’s crucial to consult with an estate law attorney who understands federal rules and Florida’s specific laws and regulations. An experienced asset protection attorney can help you navigate the rules, maximize your tax benefits and ensure your estate plan aligns with your goals. Don’t wait—start planning today to protect your estate and provide for your loved ones.