Strategic Gifting, Taxes & 2025 Changes

For high-net-worth investors, the ability to gift assets offers a strategic financial mechanism to transfer wealth, encompassing both immediate and long-term implications. It is important to understand the gifting limits and related tax considerations to maximize the advantages and comply with federal regulations. In this article, we’ll explore the gift tax, the values of gifting, and consider some gifting limitations to help provide a fundamental understanding of this beneficial strategy.

What is a Gift Tax?

Typically, the IRS levies a gift tax when an asset transfers from one individual to another and when the value of the gift exceeds certain thresholds determined by the government. Before considering this strategic tool, we recommend consulting with a CPA or tax accountant to understand the nuances of gifting related to your specific circumstances.

The intention of the gift tax is to prevent wealthy individuals from gifting assets during their lifetime to avoid estate taxes when they die.

As of 2024, the maximum annual gift allowed by the IRS before imposing a gift tax stands at $18,000 per recipient per year. Meaning, an annual gift of up to $18,000 to an individual is permissible without triggering gift tax consequences or the need to file an IRS gift tax return. Importantly, understand that exceeding this limit requires you to report the excess amount by filing a gift tax return. However, this does not necessarily trigger an immediate tax bill; rather, it reduces your larger lifetime gift tax exclusion that is subject to every taxpayer during their lifetime. Due to the complexities of gifting rules, we highly recommend seeking the expertise and guidance of a tax advisor or tax accountant prior to considering the gifting of assets.

Review Your Estate Plans & Gifting Before 12/31/25

For individuals with estates valued under the federal exclusion limit—currently $13.61 million for 2024**—leveraging higher gifting amounts may prove a beneficial strategy. Transferring assets while living potentially reduces the overall value of your estate, helping to minimize estate taxes upon death. This approach allows you to pass on wealth more efficiently, but also provides your gift recipient with an opportunity to boost their personal financial security.

Several proposed major changes set to expire on December 31, 2025, may impact investors with a net worth of $6 million or greater. As with most tax laws and regulations, federal annual gift tax exclusions are subject to change, potentially affecting the use of a gifting strategy. It is critical to consult with your financial planner, estate planner, and tax accountant to help ensure your plan is up-to-date and ready to adapt to any bureaucratic changes. At ClearPlan Wealth Management, we collaborate with you and our designated circle of trusted professionals, to help formulate and create the most advantageous gifting strategies for your unique situation. 

Gifting Can Foster Wealth Transfer & Philanthropy

Navigating the intricacies of gifting requires careful analysis and consideration of your specific financial situation balanced with your desired goals. Beyond the immediate benefits of a reduced overall estate size and mitigation of potential tax burdens, gifting helps to foster intergenerational wealth transfer or provides support to your chosen charitable organization. Whether you consider financial gifts to family members, to favorite charitable associations, or a designated trust, consulting with a financial advisor, tax accountant, and estate attorney helps provide you an informed understanding and helps to ensure you comply with the most current tax laws. Have questions or need a trusted resource? Please reach out to us. We have a network of resources ready to assist and would be glad to connect you!

In conclusion, understanding gifting limits and their implications offers you a helpful strategy for effective wealth management and estate planning and transfer. By leveraging the annual gift tax exclusion in a thoughtful, intelligent manner, you can help to optimize asset transfer, reduce tax burdens, and align your financial strategies with your long-term goals. Whether you're exploring gifting opportunities under the current federal guidelines or preparing for future changes, proactive planning helps to ensure your gifting initiatives contribute positively to your overall financial health and legacy planning.

BOTTOM LINE: If your total estate is estimated to be $6 million or more by your projected date of death, the total estate taxes due at your death may likely increase. Proactive individuals that address possible changes and implement strategic “tax avoidance plans” may potentially realize significant tax savings.

** The TCJA threshold is due to expire on 12/31/25, reducing the maximum estate threshold from $13 Million to $6 Million. Should the current rule allowing a maximum of $13 million expire, the impact will affect a larger percentage of the population, requiring many more to implement careful financial planning to help ensure an estate plan is properly structured.

About the Author:

Troy Brewer has a talent for connecting successful people while serving as a respected mentor on the path to prosperity. By facilitating an all-encompassing approach to wealth management, Troy utilizes his extensive network of resources including investment bankers, estate planners, accountants, and business leaders to develop creative financial solutions for his clients. By fostering meaningful relationships, orchestrating financial strategies, and serving as a trusted confidant, Troy helps his clients achieve their desired life and legacy.

Troy has spent more than 25 years in the financial services industry, focusing on maintaining tight multigenerational relationships through a process-driven approach. As a Chartered Retirement Plans Specialist^® and member of the Baltimore Estate Planning Council, Troy specializes in low-cost investments, complex / multigenerational wealth planning and tax efficiency. His clients include business owners, corporate executives, and affluent families. Learn more about Troy or schedule a consultation.

Any opinions are those of ClearPlan Wealth Management and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. This information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented here, as financial advisors of Raymond James, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult your financial advisor about your individual situation. Raymond James does not provide tax or legal services.