Individuals with substantial personal resources often have a goal to preserve as much of that wealth as possible. They want to enjoy a comfortable standard of living themselves and to enrich their loved ones by sharing their good fortune after they die.
Estate planning often involves efforts to maximize the legacy while minimizing liabilities. For those with significant resources, estate taxes might potentially be cause for concern. Multimillion-dollar estates may have to pay taxes before beneficiaries inherit anything from the estate. Structured giving to beneficiaries is one of several tactics that can help people minimize estate tax risks while optimizing what their loved ones receive.
How structured gifting works
Testators hoping to limit their estate tax obligations in the future must diminish their personal holdings before they die. Transferring generous gifts to their loved ones throughout their golden years can be a way to achieve that goal. Testators identify potential recipients and then make the largest gifts they can without triggering gift taxes.
In 2025, the annual exemption limit for gifting is $19,000 per recipient. An individual with three children and 11 grandchildren transferring the maximum amount to each beneficiary in cash could diminish their estate by $266,000 tax-free in 2025. Spread out over the course of multiple years, those gifts can reduce the size of an estate and significantly improve the standard of living enjoyed by the recipients of those gifts.
Testators planning structured gifting often try to make large gifts early in their retirement years and then taper them off as time passes. Any sizable transfers made in the three years prior to an individual’s death count toward the overall value of their estate. Therefore, people often try to phase out gifting well before they pass the average life expectancy for their demographic.
Structured gifting, when conducted in conjunction with other asset protection efforts, can help people keep their wealth within their family instead of sending their resources to fill public coffers. Learning more about estate taxes can help people embrace reasonable estate planning tactics to minimize their estate tax liability. Testators who make strategic gifts often enjoy greater peace of mind and the joy of watching their loved ones benefit from their inheritance while they are still alive.