Gifting assets before death might seem superfluous to those with existing wills. However, pre-inheritance transfers offer significant benefits. Understanding the tax implications of providing financial assistance to a loved one is vital. Many are unaware of gift taxes, which can lead to unexpected consequences. Please continue reading as we explain these complex taxes and highlight the importance of consulting with an experienced Rockland County Estate Planning Attorney to discuss your options and potential avoidance strategies.
What is a Gift Tax?
First and foremost, it’s imperative to understand that gift taxes are essentially a tax on the transfer of money or property from one individual to another without the recipient paying the full value in return. When you are considering gifting assets, it’s important to be aware of the associated tax implications. The federal government imposes an annual gift tax. As of 2025, you are allowed to gift up to $19,000 per person without incurring any taxes. These annual gifts will be incorporated into your lifetime gift tax exemption.
In addition to the annual limit, there is a lifetime gift tax exemption, which is set at $13.999 in 2025. This means that throughout your life, you are permitted to gift a total of $13.99 million in assets without these transfers being taxed. For instance, if you gift your grandchild $30,000 for their college education, the first $19,000 of this gift will fall under the annual exclusion and thus will not be taxed. However, the remaining $11,000 will be included towards your lifetime gift tax exemption. If your lifetime exemption has been fully utilized, the remaining funds will be subject to gift tax. It’s crucial to consider both the annual and lifetime gift tax exemptions when planning to gift assets.
Is It Possible to Avoid Gift Taxes in New York?
Understanding New York’s gift tax can be complex. While staying within the annual tax exclusion is the simplest way to avoid it, other strategies exist for larger transfers, such as direct payments for educational or medical expenses. For those anticipating exceeding the annual limit, Trust Funds can be a valuable tool. By placing assets into a trust, the assets will technically be removed from your estate, meaning you can potentially avoid gift taxes on the transfer.
Given the intricacies of gifting assets in New York, consulting a qualified estate planning attorney is crucial. Navigating these regulations can be difficult, and professional guidance is highly recommended. At The Lauterbach Law Firm, our team is committed to understanding your unique circumstances to help you determine the best course of action. Connect with our legal team today to schedule a consultation to discuss your needs.
