Gifting Annual Exclusion Amounts

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2023 Gifting Annual Tax Exclusions Amounts

I’ve Created an Irrevocable Trust and am Interested in Gifting Annual Exclusion Amounts to Decrease my Taxable Estate, but I am Gifting in Disproportional Amounts for Each of the Children’s Families. Isn’t This Giving Unequal Amount to My Children?

When considering the nuances of gifting annual exclusion amounts, many questions like this arise. According to Des Plaines Estate Planning lawyers the answer is NO. Contributions into an Irrevocable Trust do not determine the ultimate ownership of the property contributed. The distribution clause in the Trust controls the ultimate disposition.

For example, you have two children, and you intend for them to be equal beneficiaries of your trust after your death. One child has two children and the other child has no children. Structured properly, you could make a gift to your ILIT of up to the annual exclusion for each of the four of them. Say you contributed $56,000 to the trust. However, after your death, each child will receive ½ of the assets of the trust, or in this example (ignoring potential growth) $28,000.

Current IRS Guidelines:

Annual Exclusions Amounts

  • The annual exclusion for gifts is $11,000 (2004-2005), $12,000 (2006-2008), $13,000 (2009-2012) and $14,000 (2013-2017). In 2018, 2019, 2020, and 2021, the annual exclusion is $15,000. In 2022, the annual exclusion is $16,000.
  • The basic exclusion amount (or applicable exclusion amount in years prior to 2011) for gifts is $1,000,000 (2010), $5,000,000 (2011), $5,120,000 (2012), $5,250,000 (2013), $5,340,000 (2014), $5,430,000 (2015), $5,450,000 (2016), $5,490,000 (2017), $11,180,000 (2018), $11,400,000 (2019), $11,580,000 (2020), $11,700,000 (2021), and $12,060,000 (2022).