Making gifts during your life can provide you with tax savings and more.
Very few Americans need to worry about federal estate tax (see Estate Tax: Will Your Estate Have to Pay?) or the federal gift tax. For deaths in 2015, everyone has a lifetime gift and estate tax exemption of $5.43 million, which means you can leave or give away up to $5.43 million without owing any federal tax. This amount goes up every year to adjust for inflation. Married couples can together leave up to twice that amount free of federal estate tax. (Some states, however, impose their own estate tax on smaller estates. See Estate and Gift Tax FAQ.)
If you do think your estate might owe estate tax, one way to avoid or reduce the tax bill is to give away property during your life. And even if you aren’t concerned about estate tax, gifts offer other benefits – you also get to see the recipients enjoy your gifts.In 2015, you can make an unlimited number of $14,000 gifts of cash or other property, completely tax-free. To ensure these tax savings, you need to remember only that no individual recipient can receive more than $14,000 in a calendar year.