There are many different strategies you can use to pass on assets to your loved ones. One of these is known as maximizing the gift tax exemption.
Along with other strategies and tools you may use to pass things on to your loved ones, the gift tax exemption allows you to give up to $16,000 per person in 2022 to as many people as you wish without this counting against your $12.06 million lifetime exemption. If you make a gift bigger than that during a year, you need to file a gift tax return.
When these gift taxes are required, especially if you hold life insurance in an insurance trust, you may need to coordinate your estate planning attorney and your tax preparation expert. Gift tax returns are due on April 15th, following the year in which the gift is made.
A gift tax applies to the transfer-by-gift of any form of property beyond the gift tax exemption, including money. Gifts between spouses are typically unlimited and don’t necessarily trigger a gift tax return, however, special considerations may apply if the spouse is not a US citizen.
Gifts to qualified nonprofits are also classified as charitable donations rather than gifts and the individual receiving the gift usually does not need to report it. Make sure that you consult with your estate planning professional to learn more about what may be required and how to proceed.
In addition to making a gift, you may want to leverage other estate planning strategies. A California estate planning lawyer can help you.