Personalized Estate Plan for New Year 2025!

Start Planning Your 2025 Gifting Strategy Today!

2025 has arrived and now is the perfect time to consider your gifting strategy as part of your lifetime estate planning techniques. Gifting is a powerful tool in your estate planning toolbox. Not only does it allow you to help loved ones and support meaningful causes, but it also decreases your taxable estate and takes advantage of excellent tax-saving opportunities.

Among the various gifting techniques, gift splitting stands out as an especially powerful strategy for married couples. With the annual gift tax exclusion set at $19,000 per recipient for 2025, understanding how gift splitting works and how to properly report it on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, is crucial.

What Is Gift Splitting?

Gift splitting is a technique that allows spouses to combine their annual exclusion amounts, effectively doubling the amount they can give to a single recipient without triggering the gift tax. For 2025, this means a married couple can jointly gift up to $38,000 to a single recipient, tax-free.

This strategy is especially beneficial for couples who wish to maximize their gifting potential and efficiently transfer wealth to the next generation. By leveraging gift splitting, couples can take advantage of higher exclusions while preserving their lifetime exemptions for future use.

Key Rules for Gift Splitting

To successfully use gift splitting, it’s important to adhere to several key rules:

1. Marital Status: Both spouses must be married to each other at the time of the gift. If one spouse passes away during the year, gift splitting can still apply to gifts made while they were both alive.
2. Consent Requirement: Both spouses must agree to split the gifts and indicate their consent on Form 709. This form must be filed even if no gift tax is owed.
3. Eligible Gifts: Gift splitting only applies to gifts of present interest. These are gifts that the recipient can use immediately, such as cash or property. Future interest gifts, such as those placed in certain types of trusts, are generally not eligible.

Benefits of Gift Splitting

Gift splitting offers several significant benefits for married couples:

1. Maximizing Annual Exclusions: By combining their annual exclusions, couples can give more to each recipient without incurring tax liability.
2. Preserving Unified Credits: Gift splitting allows couples to transfer wealth efficiently without depleting their unified credit against estate and gift taxes. For 2025, the lifetime exemption amount is $13.99 million per individual (or $27.98 million per couple).
3. Facilitating Family Wealth Transfers: By utilizing gift splitting, couples can provide substantial financial support to children, grandchildren, or other loved ones, helping them achieve their goals and secure their futures.

Gifting Strategies to Consider in 2025

In addition to gift splitting, there are several other strategies to incorporate into your 2025 gifting plan:

1. Annual Exclusion Gifts

Take full advantage of the $19,000 annual exclusion per recipient. By systematically making annual exclusion gifts, you can reduce your taxable estate over time while providing meaningful assistance to loved ones.

2. Educational and Medical Expense Gifts

Payments made directly to educational institutions for tuition or to medical providers for qualifying expenses are not subject to gift tax or the annual exclusion limit. These gifts can be an effective way to support family members while preserving your exclusions.

3. Establishing Trusts

Consider establishing irrevocable trusts to benefit your loved ones. Certain types of trusts, such as irrevocable life insurance trusts (ILITs) or dynasty trusts, can help you transfer wealth tax-efficiently while maintaining control over the assets.

4. Charitable Gifting

Charitable contributions are another impactful way to reduce your taxable estate. Contributions to qualifying charities may provide immediate income tax deductions while supporting causes you care about.

5. Utilizing Lifetime Exemptions

For 2025, the lifetime exemption amount remains historically high at $13.99 million per individual. Consider making larger gifts to take advantage of this exemption before it potentially decreases due to legislative changes or sunset provisions.

Reporting Gift Splitting on Form 709

To properly utilize gift splitting, both spouses must file Form 709, even if the total gifts are within the annual exclusion limit. Key points to remember when filing:

• Filing Requirements: Each spouse must file a separate Form 709, indicating their consent to split the gifts. The forms should be consistent in reporting the total amount given and the allocation between spouses.
• Deadlines: Form 709 is typically due on April 15 of the year following the gift. Extensions may be requested by filing Form 4868.
• Recordkeeping: Maintain detailed records of all gifts made during the year, including the value of the gifts and any appraisals for non-cash assets. Ask for gift letters from the charity receiving your generous donation.

For Informational Purposes only and not for legal or tax advice.

About the Author – Marie Feindt, JD 

Marie Feindt is the Planning Specialist – Estate Attorney at Members’ Wealth, a boutique wealth management firm that offers a comprehensive and holistic approach to serving individuals, families, business owners, and institutions. The firm’s goal is to preserve and grow its clients’ wealth to endure over time, while thoughtfully evolving its strategy to suit an ever-changing world. With over 20 years of estate planning experience, Marie and the Members’ Wealth team thrive on bringing clarity and confidence to clients’ unique situations. She believes everyone, young adults and older, need the essential documents to conserve and preserve and transfer assets accumulated during lifetime to the next generation.

Marie received her JD from Widener University School of Law, her bachelor’s degree from Penn State University, University Park and is currently enrolled in the Villanova University Charles Widger School of Law Graduate Tax Program.

Marie is an Adjunct Faculty at the Villanova University College of Professional Studies Paralegal Professional Certificate Program where she teaches Estates & Trusts and Civil Procedure & Litigation and Torts & Personal Injury Law.

Marie volunteers for a monthly legal clinic at The Salvation Army in Chester, PA facilitated by the Christian Legal Clinic of Philadelphia. She has served on the Women’s Commission of Delaware County and as a Board Member for the Delaware County Literacy Council.

Marie enjoys biking, reading, yoga and walking in her free time with her husband and three children.

To get in touch with the Members’ Wealth team today, I invite you to email info@memberswealthllc.com or call (267) 367-5453. 

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