US gifting, and why it’s so important now

US individuals

For US individuals, gifting has long been part of estate planning. Most know about the yearly exclusion, which currently stands at US$17,000, as well as the lifetime gift and estate tax exemption, which stands at US$12.92 million (US$25.84 million per married couple). These limits have gradually increased since 2017, when they had a big jump with the implementation of the Tax Cuts and Jobs Act. What many don’t know is that many of the tax cut provisions are set to expire at the end of 2025. One of the cuts that are set to expire is the increased gift and estate exclusion. This means that the exclusions will be set to pre-Tax Cuts and Jobs Act levels (adjusted for inflation), which will essentially cut the exclusions in half. With the current tax rate up to 40% on assets above the exclusion limit, there is a potential for large savings when planning ahead. Even if you’re not above the new estate threshold now, you may end up there at some point, and any gifts before the sunset deadline will qualify for the current, higher exemption threshold.

Non-US individuals

The current estate exclusion amount is set at only US$60,000 for individuals who own US assets. This also applies to investments such as US stocks – which could come as a surprise to many investors. To minimise the effects, many use the Gift and Estate Tax Treaties to increase the exclusion amounts based on certain criteria, often setting the exclusion at US levels. This means that non-US individuals with investments in the USA are also facing a cut of about 50% in the exclusion amount when the sunset of the 2017 Tax Cuts and Jobs Act comes into effect. We expect that there will be significant gifting in the next couple of years, so we advise you to discuss these issues with your financial and tax advisors sooner rather than later to avoid having to rush estate planning through at a later stage.

See the list of current Gift and Estate tax treaty countries here.