As the year draws to a close, it’s a great time to revisit your gifting strategy — especially if you want to transfer wealth efficiently while minimizing future estate tax exposure. One of the simplest and most powerful tools available is the gift tax annual exclusion. In 2025, the exclusion amount is $19,000 per recipient. (The amount remains the same for 2026.)

Be aware that you need to use your annual exclusion by December 31. The exclusion doesn’t carry over from year to year. For example, if you don’t make an annual exclusion gift to your granddaughter this year, you can’t add the unused 2025 exclusion to the 2026 exclusion to make a $38,000 tax-free gift to her next year.

How can you leverage the annual exclusion?

Making annual exclusion gifts is an easy way to reduce your potential estate tax liability. For example, let’s say that you have four adult children and eight grandchildren. In this instance, you may give each family member up to $19,000 tax-free by year end, for a total of $228,000 ($19,000 × 12).

Furthermore, the gift tax annual exclusion is available to each taxpayer. If you’re married and your spouse consents to a joint gift, also called a “split gift,” the exclusion amount is effectively doubled to $38,000 per recipient for 2025 and 2026.

Bear in mind that split gifts and large gifts trigger IRS reporting responsibilities. A gift tax return is required if you exceed the annual exclusion amount or you give joint gifts with your spouse. Unfortunately, you can’t file a “joint” gift tax return. In other words, each spouse must file an individual gift tax return for the year in which they both make gifts.

Also, beware that some types of gifts aren’t eligible for the annual exclusion. For example, gifts must be of a “present interest” to qualify.

What’s the lifetime gift tax exemption?

If you make gifts in excess of the annual exclusion amount (or gifts ineligible for the exclusion), you can apply your lifetime gift and estate tax exemption. For 2025, the exemption is $13.99 million. The One Big Beautiful Bill Act permanently increases the exemption amount to $15 million beginning in 2026, indexing it for inflation after that.

Note: Any gift tax exemption used during your lifetime reduces the estate tax exemption amount available at death.

Are some gifts exempt from gift tax?

Yes. These include gifts:

  • From one spouse to the other (as long as the recipient spouse is a U.S. citizen),
  • To a qualified charitable organization,
  • Made directly to a health care provider for medical expenses, and
  • Made directly to qualifying educational institution for a student’s tuition.

For example, you might pay the tuition for a grandchild’s upcoming school year directly to the college. The gift won’t count against the annual exclusion or your lifetime exemption.

Review your estate plan before making gifts

If you’re considering year-end giving, it may be helpful to review your overall estate plan and determine how annual exclusion gifts can support your long-term goals. We can help you identify which assets to give, ensure proper documentation and integrate gifting into your broader wealth transfer strategy.

Theus Law Offices specializes in a complete range of estate planning and elder law services, including wills, trusts, probate, successions, estate administration, and probate litigation. If you need a Louisiana wills and trusts lawyer or succession attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe, or elsewhere in Central Louisiana, let our certified estate planning specialist and probate lawyers help you.