As CBS Boston explains in “Our Families: Giving It Away,” your federal estate tax exemption, or the amount you can give away tax free when you pass, is $5.45 million for 2016. If you have more assets than that, your estate will owe federal estate taxes.
Married couples also have an unlimited gifting privilege between spouses in life or death.
The annual gifting exclusion a person can give away is $14,000 year to as many recipients as we want—provided that you have the money. Married couples can gift $28,000, or $14,000 each.
If you give away your money, your estate won’t be reduced by an estate tax on it when you die. Therefore, you can whittle down your estate by maximizing your gift exclusion giving to reduce the estate that is potentially subject to estate taxes.
Not only can gifting be an estate planning tool for you to save on future estate taxes, but you can enjoy watching your dollars work for your children or grandchildren while you’re still alive.
However, you shouldn’t give away assets that you might need in the future.
Another thought is, if you have grandchildren in college or grad school, you can pay their tuition and medical insurance. However, you need to pay it directly to the school, and you could still write them a check for $14,000 … and with your spouse, you could write it for $28,000.
Reference: CBS Boston (November 24, 2016) “Our Families: Giving It Away”