The calls for tax reform are growing louder in Washington. Among other proposals, the Trump administration advocates a repeal of federal estate taxes. Yet even with that possibility looming, it's hard to go wrong by giving away assets to family members in lower tax brackets.
Not only will this reduce the size of your taxable estate, it will likely save income tax in the future, regardless of the fate of tax reform. Best of all, the gifts are sheltered from federal gift tax by the annual gift tax exclusion.
That exclusion covers the value of any gifts, including cash and securities, up to $14,000 in 2017 and you can make gifts to as many people as you like. You don't even have to file a gift tax return. What's more, the annual exclusion is doubled for joint gifts made by a married couple, though you do have to file a gift tax return in this case.
The IRS recently announced that the exclusion will increase to $15,000 per recipient for the 2018 tax year. The exclusion is indexed for inflation and is increased only in increments of $1,000. The last hike was five years ago.
Therefore, if you and your spouse have four children and six grandchildren, say, you could give them each $30,000 in 2018 for a total of $300,000, without paying a penny of gift tax. Consider how this simple technique can benefit your situation.
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