DISCLAIMER: THE INFORMATION CONTAINED HEREIN IS SOLEY FOR EDUCATIONAL PURPOSES. IT IS NOT LEGAL ADVICE OR LEGAL AUTHORITY AND IS ONLY THE AUTHOR’S INTERPRETATION OF ESTATE PLANNING, TRUST ADMINISTRATION & PROBATE TAX LAWS.
As an estate planning attorney, one of the most common questions I hear is: “How much can I give away without creating tax problems?” The answer depends on a mix of federal rules, state laws, and your overall estate plan. Gift planning is not simply about moving wealth. It’s about timing, structure, and compliance. The interplay between exclusions, exemptions, and advanced trust structures means professionals must stay sharp on both tax code mechanics and practical implementation. Let’s break it down.
The Annual Gift Exclusion
The IRS allows you to give a certain amount each year to as many people as you like—without having to pay gift tax or even file a gift tax return. For 2025 and 2026, that annual exclusion is $19,000 per person.
- Example: You could give $19,000 to each of your three children, and your spouse could do the same. That means together you could transfer $114,000 in one year without touching your lifetime exemption.
DSUE (Deceased Spousal Unused Exclusion
When discussing lifetime gifting strategies, it’s important to consider not only the annual exclusion and lifetime exemption, but also the potential impact of DSUE (Deceased Spousal Unused Exclusion). DSUE allows a surviving spouse to use any unused portion of the deceased spouse’s federal estate and gift tax exemption, provided the estate filed a timely Form 706 electing portability. This means a surviving spouse may have significantly more exemption available for gifting during life—but the same limitations still apply. Annual exclusion gifts remain capped at $19,000 per recipient in 2025 and 2026, and any taxable gifts made above that threshold will reduce both the survivor’s basic exemption and any DSUE amount carried forward.
The key limitation for DSUE planning is that it is not permanent or guaranteed. If the survivor remarries and the new spouse dies, the DSUE from the first spouse is lost and replaced with the new spouse’s unused amount, if any. In addition, the DSUE does not adjust for inflation over time, unlike the basic exclusion amount. That means early use of the DSUE through lifetime gifting can be a prudent strategy. However, practitioners must weigh liquidity, family dynamics, and future estate tax exposure carefully, since once the DSUE is applied against gifts, it cannot be reclaimed.
The Lifetime Exemption
In addition to the individual annual exclusion, there’s a much larger amount you can give away during your lifetime before any federal gift or estate tax is owed. In 2025, that exemption is $13.99 million per person. In 2026, it increases to $15 million and is indexed to inflation thereafter.
- Keep in mind: Any gifts you make above the annual exclusion chip away at this lifetime exemption.
- In 2026, if 100% of DSUE was carried over, the surviving spouse can exclude $30 million of lifetime exemption.
What Counts as a Gift?
A “gift” isn’t just handing over cash. It includes:
- Forgiving a loan.
- Transferring property below fair market value.
- Paying someone’s bills directly (unless it falls under certain exceptions like medical or educational payments made directly to the provider).
Smart Ways to Give Without Triggering Limits
- Pay tuition or medical expenses directly. These payments don’t count against your annual exclusion.
- Use 529 plans. You can “front-load” up to five years’ worth of annual gifts into a college savings plan.
- Leverage trusts. Certain types of trusts can help maximize gifts while keeping control and protecting assets.
Why Planning Matters
Gift and estate tax laws are constantly shifting. By working with an estate planning attorney, you can make strategic gifts that support your loved ones now while protecting your legacy later.
About the Author
Patrick J. Sullivan
Adams & Sullivan, PC, LLO
Mr. Sullivan has been practicing law for more than 30 years in the greater Omaha area. His practice focuses heavily on corporate law and family businesses, including formation of corporation/limited liability companies and buying/selling of ongoing businesses and general business issues.