There are many different estate planning strategies that can help people minimize estate taxes. Those with businesses, investment accounts and multiple real estate holdings may be at risk of costly estate taxes without proper planning. The tax mitigation strategies used during estate planning may include taking on co-owners for certain assets, transferring property to a trust and even making strategic gifts in the maximum amount available to children, grandchildren and other beneficiaries.
Testators making strategic gifts to their loved ones during their golden years get to enjoy watching people make use of their inheritance. They can feel a sense of pride because they help their loved ones purchase their first homes, start small businesses or pay for college. Every year, the maximum amount that people can exempt from the state taxes and gift taxes changes. As such, testators may need to regularly review tax exemptions and make adjustments to their estate plans and gifting strategies.
What is the 2025 gift tax threshold?
In 2025, individuals can give another person up to $19,000 worth of goods or cash without risking gift taxes. Those with multiple beneficiaries can potentially reduce the taxable value of their personal holdings by six figures if they make the maximum gift allowable to all of their children, grandchildren and other chosen beneficiaries.
Those gifts can reduce the personal property that belongs to a testator and help them drop the overall value of their estate below the current tax threshold. The federal estate tax threshold in 2025 is $13.99 million. Depending on the state where a testator lives, there may be a lower threshold for state estate taxes. New York and Connecticut collect estate taxes, for example, while Florida does not.
Testators also have to consider that the value of gifts made over the last three years prior to their death can contribute to the value of their estate for the purposes of taxes. Many people planning strategic gift strategies prioritize transferring resources in their 50s, 60s and 70s, only to taper them off later in life to avoid estate tax complications during estate administration.
Following changes to federal and state tax exemptions can help people reduce their tax liability and optimize what their loved ones inherit. Individuals making strategic gifts often want to intentionally transfer the maximum amount possible to their beneficiaries each year to have the largest impact they can on their estate tax risk.