By Rick Fingerman, CFP

There are generally two ways you can make a gift: while alive (lifetime gifts) or after death (testamentary bequests).

Rick Fingerman

Making gifts during your lifetime has certain benefits:

  1. Giving money to loved ones while alive allows you to see them enjoy the money or achieve a goal sooner, such as buying a house.
  2. Gifting while alive allows you to lower your taxable estate for estate tax purposes, which could mean more money going to your heirs rather than the government. Although most states will never reach the current federal estate tax threshold of $12.06 million, individual states may impose an estate tax as well. Hawaii, for example, has one of the highest estate taxes while New Hampshire has none.
  3. You can gift anyone you like up to $16,000 a year (the federal gift exclusion amount in 2022) without having to file a Form 709 gift tax form. Each spouse can gift an individual up to $16,000, doubling the gift.
  4. You can always gift more than $16,000 a year, however, a Form 709 is used to keep track of these lifetime gifts. No tax is due on the giver or receiver at the time of the gift, however, these gifts do get added back into your estate to calculate any federal estate tax you may owe upon your passing. At this time, only Connecticut and Minnesota impose state gift taxes above the annual limits.

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