What is the lifetime gift exemption?

Gifting money or property to loved ones is a common way of showing affection and support. However, it is important to understand the tax implications of such gifts, especially if you are planning to make substantial gifts. In the United States, there is a concept called the “Lifetime Gift Exemption” that sets limits on the amount of money or property that can be given away tax-free during an individual’s lifetime.

What is the current lifetime gift exemption per person?

In 2023, the lifetime gift exemption is $12.92 million per individual. This means that each person can give away this amount during their lifetime without having to pay any estate tax. It is important to note that this exemption is cumulative, meaning that if you have already used some of your lifetime gift exemption, the remaining amount will be adjusted accordingly.

Benefits of the Lifetime Gift Exemption

One of the biggest benefits of the lifetime gift exemption is that it allows individuals to transfer wealth to their loved ones without having to pay any estate tax. This can help to reduce the overall tax burden for both the giver and the recipient, as well as allowing the wealth to pass on tax-free from your estate to the recipient. Additionally, gifting money or property during your lifetime can also help to reduce the size of your estate, potentially lowering the amount of estate tax that will be due upon your death.

Another important aspect of the lifetime gift exemption is that it applies to gifts of both money and property. This means that you can give away stocks, real estate, or other assets in addition to cash gifts. It is also important to note that the lifetime gift exemption applies to gifts made to any individual, not just family members. This means that you can give gifts to family members, friends or business associates without having to pay gift tax, as long as the total amount of gifts to each individual does not exceed the lifetime gift exemption.

In conclusion, the lifetime gift exemption is a valuable tool for individuals looking to transfer wealth to their loved ones without having to pay gift tax. With a lifetime gift exemption of $12.92 million per individual in 2023, individuals have significant flexibility to make tax-free gifts during their lifetime. However, it is important to understand the full tax implications of gifting.

Next Steps

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Related Readings

• Charitable Remainder Trust Guide
• The Benefits of Charitable Giving
• Our Guided Tax Planning Tools: How & Why

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