The fundamental power of strategic gifting remains a key part of an estate plan, even with the historically high federal estate and gift tax exemptions. A recent article from Financial Advisor, “The Estate And Gift Tax Exemption is NOT ‘Sunsetting,’” says that every dollar, appreciated share, or other asset moved out of a taxpayer’s personal balance sheet reduces their taxable estate. Over time, these gifts, whether invested by recipients or held in trust, can yield meaningful long-term tax savings.

Gifting isn’t just about generosity; philanthropy is also important. It’s about efficiency, creating a financial legacy and minimizing future tax burdens for yourself and loved ones.

Starting in 2026, the annual gift tax exclusion will remain at $19,000 per recipient, meaning you may gift $19,000 per year to as many people as you wish without filing a gift tax return. Married couples may gift $38,000 per person annually. This is a “use it or lose it” gift. If there are multiple children and grandchildren, this is a useful way to transfer wealth with little administrative burden.

Let’s use an example of gifting $1 million to an irrevocable trust. If the contribution was invested in a portfolio with a 6% return rate, the compounded result after five years would be $1,338,226. The growth of $338,226 would no longer be taxable to the grantor, and 40% of the growth would be shielded from federal estate taxes on the death of the grantor. If the grantor had died without moving the $1 million to the trust, the asset would have received a step-up in basis for income tax purposes, avoiding 37% income tax at the highest rate. However, gifting the asset resulted in estate tax savings of 40% at the decedent’s passing.

Three commonly used approaches to giving are outright gifts, irrevocable trusts and split-interest trusts. Each has benefits and drawbacks.

Outright gifts of cash, security, real estate, or collectibles are good for the beneficiary: they receive the assets right away and have full control and access. The downside? The person making the gift has given up all control, and the recipient doesn’t benefit from a step-up in cost basis. If the assets are sold later, capital gains taxes may apply to the original basis. This type of gift makes the most sense for cash or marketable securities, where control and liquidity are both straightforward.

An Irrevocable trust is appropriate if the grantor seeks control over how assets are distributed: who receives them, when they are to receive them and what conditions apply. This makes irrevocable trusts very appealing. When drafted by an experienced estate planning attorney, an irrevocable trust removes assets from the taxable estate and protects beneficiaries from creditors.

Split-interest trusts are trusts that grant access to assets at a specific time to the grantor and heirs while benefiting a charitable cause, either during the trust’s term or at its conclusion. Commonly used split-interest trusts are the charitable remainder trust (“CRT”), where the trust provides an income stream to the loved one for a set term. At the end of the trust, the remainder goes to the designated charity.

Be sure to discuss gifting and tax strategies with one of our estate planning attorneys to be sure the tax strategy complements the estate plan and does not work against it. The best estate plan is strategically planned, creating a legacy for the family and the future.

Reference: Financial Advisor (Nov. 25, 2025) “The Estate And Gift Tax Exemption is NOT ‘Sunsetting’”