Say, “I Love You” Responsibly Through Tax Gifting and Estate Planning 

Valentine’s Day is just around the corner which means people all across the globe are brainstorming original ways to express love to their nearest and dearest. While love letters, chocolates, flowers, and fancy dates are all timeless classics, none offer the longevity of responsible tax gifting.

Responsible tax gifting? Sounds romantic… (*rolls eyes*)

Yes, we know, estate planning isn’t the first thing that comes to mind when most folks think of Valentine’s Day and yet a financial gift that keeps giving is a powerful way to share love not only now, but for the rest of your loved one’s life. In 2022 this is especially true.

Late last year the IRS released Rev. Proc. 2021-45 with inflation-adjusted amounts for 2022 individual taxpayer returns. For the first time since 2018, the gift tax annual exclusion amount was raised, leaping from $15,000 to $16,000. Likewise, the official estate and gift tax exemption climbed to $12.06 million per taxpayer from its previous $11.7 million. Taken together, this means that individuals have more space for gift giving in their estate plans than ever before.

Strategic Gift Giving: A Path to Life-Long Love and Support
Presently, the biggest estates are taxed at 40%. This means that if your estate’s value exceeds the tax-exempted amount, an enormous proportion of your life’s work could end up in government coiffures. In 2022, wealthy individuals will be able to pass on an additional $360,000 before this happens.

This added wiggle room is great news for many, but it may not last forever. In 2026, the $12.06 million estate and gift tax exemption is set to return to its 2017 level of $5.49 million as the Tax Cuts and Jobs Act expires. If individuals delay giving until the day they die, they may thus end up having a lot less to give. Luckily the newly-expanded gift tax annual exclusion means that opportunities for lifetime gifting have grown.

Under the 2022 legislation, an individual can gift up to $16,000 each year to as many people as they like and what’s more, spouses can do the same. The advantages here are two-fold. Financial gifts do not detract from the $12.06 million estate tax exemption which means by gifting early and often you increase the amount that you can pass tax-free to loved ones. Additionally, when you move financial assets outside of your estate, any appreciation does not contribute to your personal net worth. This means that money given early has the opportunity to grow without negatively impacting your tax situation.

Taking advantage of the annual gift tax exclusion is only one of a range of strategies that allow you to expand the amount you can ultimately pass on to loved ones. Learning about and making the most of gifting opportunities is a powerful way to not only show love now but to ensure your love is felt long after you’re gone.

The best way to implement a strategic gifting plan is to speak with an experienced estate planning attorney. That is where the Law Firm of Christopher W. Dumm comes in.

To learn more, do not hesitate to reach out to us either by calling 417-623-2062 or using the contact form on our website.

Contact the Estate Planning Attorneys at the Law Firm of Christopher W. Dumm