Estate planning involves making decisions to protect your family and legacy. One critical question to consider is whether it’s better to transfer assets during your lifetime or after your death. While many people choose to pass down inheritances through their wills or trusts, giving while living can offer unique benefits. This article examines the advantages and considerations of gifting assets during your lifetime and how this approach fits into your Tyler estate planning strategy.
Gifting assets during your lifetime can bring immediate rewards for both you and your beneficiaries, explains article, “Gifting While You’re Alive: Tax Benefits and Practical Tips,” from Kiplinger. Some benefits include:
However, it’s essential to incorporate gifting into a comprehensive estate plan to avoid unforeseen financial burdens.
The IRS sets annual exclusion limits for tax-free gifting. For 2024, individuals can gift up to $18,000 per person without triggering gift taxes. In 2025, this amount increases to $19,000 per person, or $38,000 for married couples.
It’s important to stay within these limits to avoid incurring gift taxes. For gifts exceeding the annual exclusion, you’ll need to file a gift tax return, and the excess will count toward your lifetime gift tax exemption.
The IRS defines a gift as a transfer of property where no equal value is received in return. Common examples include:
You can cover tuition or medical expenses for someone without counting it as a gift—provided you pay the institution or medical facility directly. This exception allows for significant giving while staying within IRS guidelines.
Gifting assets like real estate or stocks requires careful planning for Tyler residents. If you transfer these assets during your lifetime, the recipient retains the original cost basis. Should they later sell the asset, they may face substantial capital gains taxes.
In contrast, assets inherited after death benefit from a “step-up in basis,” meaning the value resets to its fair market value at the time of your passing, potentially reducing taxes for your heirs.
If you want to help a family member purchase a home or start a business, consider an intrafamily loan. Structured properly, these loans can avoid being classified as a taxable gift while still providing substantial financial support.
Section 529 education savings plans allow for significant contributions toward a loved one’s future education. You can “front-load” contributions by funding up to five years’ worth at once—$90,000 in 2024 or $95,000 in 2025—without triggering gift taxes.
Before transferring assets, consider the potential risks:
A well-crafted estate plan can mitigate these risks while allowing you to enjoy the benefits of lifetime gifting.
If you’re considering gifting as part of your estate plan, consulting with an experienced Tyler estate planning attorney is essential. At Campbell Law Firm, we help families create personalized strategies to meet their financial goals, minimize taxes, and protect their legacy.
Ready to plan your estate with confidence? Book a consultation with Campbell Law Firm today and learn how gifting fits into your Tyler estate planning goals.
