Estate and Gifting Strategy

Core Concepts

The Unified Estate/Gift/GST Framework

Federal transfer taxes operate as one unified system: lifetime taxable gifts and the estate at death draw down a single lifetime exemption, with a flat 40% tax on transfers above it.

• Lifetime exemption: $15 million per person effective 2026 under the One Big Beautiful Bill Act (2025), indexed for inflation thereafter — verify the current-year figure. This made the higher exemption permanent and replaced the scheduled TCJA sunset; the pre-2026 planning frame of "use it before it drops to ~$7M" is obsolete. Urgency-driven exemption-use strategies should be re-evaluated on their standalone merits.
• Annual gift exclusion: $19,000 per donor per recipient as of 2025, indexed in $1,000 increments — verify the current-year figure. Exclusion gifts consume no lifetime exemption and require no gift tax return if that is the only gifting.
• Gift-splitting: Spouses may elect on Form 709 to treat gifts made by either as made half by each, doubling the effective exclusion per recipient ($38,000 per couple per recipient as of 2025). The election applies to all gifts by both spouses that year.
• GST tax: A separate exemption (same dollar amount as the estate exemption) applies to transfers that skip a generation (e.g., to grandchildren or to trusts that will benefit them). GST exemption must be affirmatively allocated (often on Form 709) to shelter trusts intended to last for multiple generations.
• Filing mechanics: Gifts above the annual exclusion are reported on Form 709 and reduce the lifetime exemption; no tax is due until the exemption is exhausted. The estate tax return is Form 706.

Portability and the DSUE

A deceased spouse's unused exemption (DSUE) can transfer to the survivor — but only by election:

• The executor must file a timely Form 706 to elect portability, even when no tax is due and no return would otherwise be required. A simplified late election (Rev. Proc. 2022-32) is available up to five years after death for estates not otherwise required to file, but relying on it is a fallback, not a plan.
• The survivor's shelter becomes their own exemption plus the DSUE amount. DSUE is frozen at the first death (not indexed afterward), and remarriage followed by the new spouse's death can forfeit a prior DSUE.
• The GST catch: GST exemption is not portable. A couple relying solely on portability wastes the first spouse's GST exemption. Families with generation-skipping intent generally need trust planning (e.g., a credit shelter/bypass trust with GST allocation) at the first death, not portability alone.