What To Know About the Coming Changes to the Lifetime Gift Tax Exemption
By Brian Famigletti, Managing Director & Head of Marketing
For high-net-worth individuals looking for tax savings, the lifetime gift tax exemption has historically been a helpful tool.
The lifetime gift tax exemption lets taxpayers gift wealth tax-free, up to a certain threshold. And as of now, that threshold is the highest it has ever been.
For tax year 2025, individuals can exempt up to $13.99 million of their gifted wealth, or $27.98 million for married couples. Assets that fall outside this exemption can be taxed at as much as 40%. In other words, maximizing your tax-free gifts can translate into millions of extra dollars for your beneficiaries.
However, if you want to make the most of this high exemption threshold, you’ll have to act fast. The limit is set to be cut in half to about $7 million per individual at the start of 2026.
The Power of Irrevocable Trusts
Gifting money to loved ones during your lifetime is a tax-efficient way to transfer wealth. But it’s important to structure those gifts carefully, to take full advantage of the tax exemption and protect your assets.
Tailored trusts can help protect your gifted wealth if your beneficiaries aren’t ready to receive your assets directly. And, in the case of irrevocable trusts, they can go a long way toward minimizing estate taxes too.
Unlike revocable trusts, an irrevocable trust essentially removes designated assets — like cash, securities, and real estate — from your estate. When you transfer them, it freezes the value of those assets for tax purposes.
For example, say you put $9 million into an irrevocable trust. That $9 million would apply toward your lifetime gift tax exemption. If those assets gained 6% annually, the investment could be worth over $16 million in ten years. The funds could still be subject to capital gains tax, but the gains of $7 million would not be subject to estate or gift tax.
Ways To Maximize the Lifetime Gift Tax Exemption
Individuals have many options when opening an irrevocable trust. Two common irrevocable trusts for lifetime gifting purposes include SLATs and GRATs.
- Spousal Lifetime Access Trust (SLAT): Assets are transferred to a trust in your spouse’s name. Your spouse can receive distributions from the fund.
- Grantor Retained Annuity Trust (GRAT): You, the grantor, can receive annuities from these set-term trusts. At the end of the term, the assets pass to your beneficiaries.
There’s a lot to consider when integrating lifetime gifting into your estate plan, and rules vary from state to state. Ultimately, a financial advisor can help you decipher which type of trust is best for your unique scenario. Schedule a consultation with Griffin Asset Management today to explore your options in more detail.
Sources:
JPMorgan: How much you can gift tax-free is set to be cut in half. Are you ready?
Investopedia: Grantor Retained Annuity Trust (GRAT): Definition and Example
Schwab: SLATs: An Estate-Planning Strategy for Couples
MetLife: Revocable vs. Irrevocable Trust: What’s the Difference?
