Because Ann and Bob have a large family of 22 children and grandchildren, according to
the IRS Section 2503 and the chart below, they can each start by gifting, a caveat of
$16,000 per year, bringing a total of $32,000 per year. For the definition of a taxable gift,
“That is, include only the decedent’s one-half of split gifts, whether the gifts were made by
the decedent or the decedent’s spouse.” However, when gifts are given to their large
family during their lifetime, it takes away the hefty estate exemptions, doing this, the tax-
free limit on their estate assets will be lower when they pass away. Therefore, there is a
great way to reduce the value of their estate without reductions in their estate exemption.
a a
Period -Year of Gift
Annual Exclusion Amount Per
Donee
1977 through 1981
$3,000
1981 through 2001
$10,000
2002 through 2005
$11,000
2006 through 2008
$12,000
2009 through 2012
$13,000
2013 through 2017
$14,000
2018 through 2021
$15,000
2022
$16,000
There are other ways to reduce their taxable estates, as follows:
• It could be by creating a Foundational Estate Plan, as a married couple, it will be very
helpful because it can reduce or even eliminate both federal and state estate taxes
assessed against their state.
• A Qualified Personal Residence Trust, which lets them live in their home for a period of
ten years, then it will pass to their children/grandchildren at a reduced value, for estate
and gift tax purposes, after the period ends.
• Creating a Charitable Trust will give them a charitable income tax deduction when the
trust is funded, and it will give them an estate a charitable estate tax deduction.
• Creating a Family Limited Liability Company which offers estate tax reduction and asset
protection.
Leaving a large estate implies paying a high amount in taxes because it imposes taxes
on the transfer of the estate of a deceased person. As of 2022, estates valued at
$12,060,000 or less are exempt from paying (up from $11.7 million in 2021), which is
more than three times the 2009 exemption level of $3.5 million.
References
Anderson, Kenneth, et al., editors. Pearson’s Federal Taxation 2023 Corporations,
Partnerships, Estates & Trusts. Pearson Education, Inc, 2023.
What's New - Estate and Gift Tax | Internal Revenue Service (irs.gov)
Frequently Asked Questions on Gift Taxes | Internal Revenue Service (irs.gov)
How to Reduce or Even Eliminate Your Death Tax Bill (thebalancemoney.com)
