Lower Your Estate's Taxable Assets by Crafting a Gift Giving Strategy

Gift giving isn’t just about you performing a generous act. It can also be a great tool for transferring your wealth, being tax efficient, and removing taxable assets from your estate. Here are some gift giving strategies that can benefit both donors and recipients.

• Leveraging the annual gift tax exclusion. You can give up to $19,000 per recipient in 2025 tax free without affecting your lifetime estate and gift tax exemption ($13.99 million for single taxpayers in 2025; $27.98 million for married couples). For married couples, this amount doubles to $38,000 per recipient when each spouse contributes.
  
  Example: A couple with three children and five grandchildren can gift $38,000 to each of their eight heir annually, removing $304,000 from their taxable estate every year without incurring any gift taxes.

• Direct payment of medical and educational expenses. You can pay for someone else’s medical bills or tuition directly to an institution without these payments counting towards your annual gift tax exclusion.
  
  Example: Grandparents can pay a grandchild’s $50,000 annual college tuition directly to the university, in addition to giving the grandchild an additional $38,000 gift, effectively transferring $88,000 tax free in a single year.

• Direct transfer of appreciating assets. Using a grantor retained annuity trust, you can transfer appreciating assets to beneficiaries with minimal tax impact. You, the grantor, receives annuity payments over a set term, with any remaining assets passing to heir tax free.
  
  Example: A business owner places $5 million in company stock into a GRAT. The initial contribution returns to the owner over time, while the stock’s future appreciation passes to heirs with minimal tax consequences.

• Charitable giving using a donor advised fund (DAF). This is a way for you to make charitable gifts while maintaining control over distributions. Contributions to a DAF provide an immediate tax deduction, while funds can be granted to charities over time.
  
  Example: You donate $100,000 in appreciated stock to a DAF, avoiding capital gains taxes while receiving a full itemized charitable deduction. The fund then distributions your donation to selected charities over several years.

• Using irrevocable trusts for tax-free wealth transfers. There are two types of irrevocable trusts to consider. First, a Spousal Lifetime Access Trust allows one spouse to gift assets into an irrevocable trust, providing financial benefits to the other spouse while removing assets from the couple’s taxable estate.
  
  Second, a Dynasty Trust lets you pass wealth through multiple generations while avoiding estate taxes. These trusts are often used for family wealth preservation and long-term asset protection.

Use these gift giving strategy ideas to start creating your own plan to pass your assets and wealth to future generations.