With the end of the year quickly approaching, now is good time to ensure you make your annual exclusion gifts for the year to reduce your taxable estate. For 2024, an individual can give $18,000 (and a married couple $36,000) to as many beneficiaries as they wish without using a portion of their lifetime federal gift and estate tax exemption. Note that the annual gift tax exclusion is set to increase to $19,000 per individual in 2025.
Annual exclusion gifts can be cash, stock or any number of other assets. Once a person gifts more than the $18,000 in any one year to a particular individual, they are generally required to file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. One thing to keep in mind is that the gift recipient will receive the asset with the donor’s income tax cost basis. This means that if they later sell an appreciated asset, they will owe income tax on the sale. Make sure to consider your cost basis when choosing an asset for gifting.
Although it is important to make annual exclusion gifts in before year end, it is generally a better idea to make those gifts earlier in the year. Making gifts early both removes the appreciation on those assets from your taxable estate and allows the growth to pass to the beneficiary without any gift tax consequences.
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