2022 Is The Perfect Year To Benefit From The Annual Gift Tax Exclusion
When your kids were younger, this time of year was when you would take them shopping to buy clothes and school supplies for the upcoming school year, and they would daydream about which Halloween costumes they wanted to wear that year and which presents they hoped to find under the Christmas tree. Life was much simpler then. If you add up the amount of money you spent on your children’s school clothes, school supplies, Halloween costumes, and Christmas presents in 1993, the sum probably seems like an absurdly low number. If your adult children spent that dollar amount in 2022, it probably would not even add up to a monthly grocery bill. The financial situation of many young adults in the United States today is dire, even those whose parents are fortunate enough to have a retirement pension or employer-provided retirement savings. In other words, 2022 is the perfect year to give cash gifts to your young adult family members. The IRS lets you give $15,000 per recipient tax free this year, but a Washington DC estate planning lawyer can help you decide how much you can afford to give.
If You Have $15,000, You Are in a Better Position Than Most People
Each year, the IRS sets the maximum amount for a single tax-free gift; this is called the annual gift tax exclusion; in 2022, the annual gift tax exclusion is $15,000. There is no limit on the number of cash gifts you can give per year, but the lifetime limit is $11 million per individual or $22 million per couple. Every few years, the annual exclusion and lifetime exclusion increase to account for inflation, so if you have $11 million to give away, unless you have an extraordinarily wide circle of friends, the IRS will have increased the lifetime exclusion by the time you reach that limit.
From a financial perspective, giving your young adult children $15,000 each this year (or even giving them a lower amount, if you hesitate to take large amounts of money out of savings) will help them more than keeping the money in your own savings for them to inherit from your estate in the distant future. Most young adults who receive cash gifts in 2022 will use the money to pay off debts or to avoid taking on new debts. If your children are among the fortunate few who have no immediate need for $15,000 and can afford to save it, then the money will help them as much in their savings accounts as in yours. This way, you can be sure that the money that is in your bank accounts is yours to spend on yourself if you choose to do so.
Contact Tobin O’Connor Ewing About the Fun Parts of Estate Planning
Estate planning isn’t all about death, and it also isn’t all about spending money on yourself. An estate planning lawyer can help you make decisions about necessary expenses, investments, and splurges for you and your family. Contact Tobin, O’Connor & Ewing for help.