Most people’s estates will not face estate taxes. That said, some people are wealthy enough that their estates will exceed the $15 million basic exclusion amount. If that is likely to be an issue for your estate, you have options before you die. The easiest one is to simply give money away, and you won’t owe taxes on those gifts if you follow the rules. Here’s what you need to know.
Estate taxes are the first thing to consider
While gift tax rules apply regardless of the size of your estate, once you have a better handle on what your heirs may have to deal with, you can start to consider gifting. When a person passes away, the value of all their assets is tallied. If the total exceeds a certain threshold, the excess is taxed. That threshold is, as noted, $15 million per person. So a married couple would, technically, have a $30 million threshold. But that $30 million figure is a bit more complicated than it looks.
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If one spouse passes away, leaving everything to the other spouse, the first spouse’s $15 million basic exclusion amount is lost unless you tell the IRS you want to take advantage of estate tax portability. So the first puzzle piece here, before you start giving money away, is to make sure you take advantage of the estate tax exemptions that are available to you.
Giving money away is the next step
If you are over the estate tax threshold or simply want to give money away, you need to be mindful of the tax implications you will face in the year you make any gifts. The giver is generally responsible for taxes on gifts, not the recipient. In other words, if you run afoul of the rules, the blowback is likely to be on you.
According to the IRS:
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.
1. Gifts that are not more than the annual exclusion for the calendar year.
2. Tuition or medical expenses you pay for someone (the educational and medical exclusions).
3. Gifts to your spouse.
4. Gifts to a political organization for its use.
There is a lot of leeway in that list if you are looking to make a gift. Notably, the annual exclusion for calendar year 2026 is $19,000 per recipient. So, if you have two children, you could give away $38,000 without triggering tax issues. If you have grandchildren, each of them could receive $19,000, too. If you have a large family, you could give a material amount of money away. And if your family isn’t large enough, you could actually pick a random person off the street and gift them $19,000. In fact, you can gift $19,000 to any number of people you like. You just can’t go over the $19,000, or you will be responsible for gift taxes.
But there’s even more wiggle room than there looks when you consider the education and healthcare exceptions. As long as the payments go directly to the healthcare provider or the educational institution, you can give an unlimited sum away. Education and healthcare gifts do not count against the annual per recipient exclusion.
While gifts to your spouse are pretty obviously exempted from taxation, the next option is to make political donations. This one is unlimited, so you could theoretically give away your entire estate before you die to a qualifying political organization.
Swinging back around to estate taxes
Given the $15 million estate tax limit, most people won’t have to worry about decreasing the size of their estates to avoid estate taxes. However, that doesn’t mean that you won’t want to make gifts while you are still alive. If you stay below the annual gift limit of $19,000 in 2026, you won’t owe taxes on the gift. And, done right, gifts to pay for school or healthcare aren’t an issue either.
