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At this very moment, the hustle and bustle to find the perfect gift for friends and family is in full effect. Many don’t know where to start. Some walk around the mall or browse online, looking for the perfect one. Well, WilkinGuttenplan may have a suggestion that could benefit both you and that special someone. Year-end gifting!

During 2021, the maximum annual gift amount that a donor can give to any one individual is $15,000 ($30,000 if the donor is married). There is no limit to the number of individuals that can receive a gift from the donor. Once a donor’s gift amount exceeds these thresholds, the donor’s lifetime exemption (currently at $11,700,000) is reduced by the excess. This lifetime exemption is carried with you until your death and once it has been completely depleted (either during life or on your estate tax return at death), the hefty estate tax (currently at 40%) is triggered.

For example, Grandma is struggling with what to give her ten grandchildren for the holidays. She writes a check to each one of her grandchildren for $15,000. Assuming the grandchildren deposit the checks in their bank accounts on or before December 31, 2021, Grandma has effectively removed $150,000 from her estate and has not diminished any of her lifetime exemption.

Under current law, the lifetime exemption of $11,700,000 is scheduled to revert back to $5,000,000 (indexed for inflation) on January 1, 2026.  Keep in mind that if new legislation passes, this decrease could happen sooner.  The annual gift tax exclusion, however, will increase to $16,000 starting in 2022.

As the saying goes, it is better to give than to receive, so get into the holiday spirit and save some estate tax dollars at the same time!

Please contact your WG tax advisor if you have any questions or would like more clarity on this subject.

Questions? Ask a WG Advisor