Another Year-End Planning Opportunity - Gifting

Has God blessed you with a more than comfortable estate of $15 million or more?  The bad news is that Uncle Sam stands to be an uninvited heir unless you do some planning.  Estate tax on any estate over that current $15 million threshold is 40%.  Ouch!

Even if your estate is under that $15 million amount, but you have still got enough that you feel comfortable giving some of it away, here are some thoughts to consider.

In 2026, you can give up to $19,000 per individual to anybody you want without the need to report in on a Gift Tax Return.  Not just family members.  If you are married, double that to $38,000 under the concept of “gift-splitting” where each of you are considered to be giving $19,000 each to a single person.

If you have a grandchild in college, you can give an unlimited amount by directly paying the college (only for tuition though, not living expenses, etc.).

Another item of with no limits, medical expenses for a family member.  Perhaps they have no insurance coverage for a special procedure, you could pay any or all of that and have no gift limitation if you pay the medical bills directly.

Both of these (tuition and medical expenses) do not count against your annual exclusion of $19,000 per individual, nor your life-time exclusion of $15 million.

If you created a “gifting plan” with the goal of moving a sizable amount out of your estate over the next 10 years, you could gift $19,000 per person over 10 years.  Let’s say you’re married and you have three adult children, and four grandchildren.  That’s seven people at $38,000 a year or $266,000 total each year.  Over 10 years, you could move $2.6 million out of your estate without using up any of your life-time exclusion.  I once had a client who had three children and seventeen grandchildren.  He managed to move over $7 million out of his estate over a 10 year period.  His estate saved paying $2.8 million to Uncle Sam!

Do you have a favorite charity that you want to do a major gift to?  (Church?  Alma Mater?  Local Community Service?  Etc.)  Good news is that such gifts are tax deductible.  (If you give enough to allow for direct itemized deductions instead of taking the standard deduction.) 

There is another class of gifting to charities that involves receiving back an annuity as well.  It’s called a Charitable Gift Annuity.  Many large charities, such as Salvation Army, Red Cross, American Cancer Society, etc. have these programs.  Let’s say you are in your 80s and you give an amount of appreciated stock as an example the fair market value is $125,000, to one of these types of charities.  You get a charity deduction of about $80,000, pay no Capital Gains tax, and get an annual annuity of about $11,000 until your death.

Have you heard?  Ecclesiastes 5:19 says, “Every man also to whom God has given riches and wealth, and has given him power to eat of it, and to take his portion, and to rejoice in his labor – this is a gift of God.”

Kelly Bullis is a Certified Public Accountant in Carson City.  Contact him at 775-882-4459.  As well as on our website at BullisAndCo.com. You can also find us on LinkedIn and Facebook.