How does lifetime gifting reduce estate tax?

Gifts above the annual exclusion use your exemption at today's value, and all future growth on gifted assets happens outside your estate. Gifting earlier, while assets are smaller, removes more future growth from the taxable estate.

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Will your estate grow into a tax problem?

Q: How can I owe estate tax if I'm under the exemption now?

Wealth compounds. A $10M estate growing 5% a year exceeds $43M in 30 years, past a couple's roughly $30M exemption. Estate tax applies at death on the amount above the exemption, at 40%.

Most families owe no federal estate tax today, because the exemption is high: about $15M per person, $30M per couple. But wealth compounds. An estate growing faster than the exemption can cross the line decades from now, and the excess is taxed at 40%. Project your estate forward to see whether it crosses the line, and how much lifetime gifting now would save.

Your situation

Married (use the couple's ~$30M exemption)

Current net worth

Expected annual growth rate (%) (after spending)

Years to project (to life expectancy)

Lifetime exemption already used

At that point

Projected estate—

Exemption (remaining today)—

Estimated taxable estate—

Estimated estate tax (40%)—

Start tracking your gifting now.

If you'll grow into a taxable estate, lifetime gifting is cheapest while assets are smaller - and every gift needs to be tracked against your exemption. Family Matters does exactly that. Try it free for 45 days.

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Why this matters even if you're under the limit today

How can I owe estate tax if I'm under the exemption now?

Because wealth compounds. A $10M estate growing 5% a year becomes more than $43M in 30 years - past a couple's ~$30M exemption. The tax is assessed at death on the amount above the exemption, at 40%.

How does lifetime gifting help?

Gifts made during life (above the annual exclusion) use your exemption at today's value, and all future growth on those gifted assets happens outside your estate. Gifting earlier, while assets are smaller, removes more future growth from the taxable estate.

Is this exact?

No. It's a planning estimate. Exemptions rise with inflation and can change with the law, growth isn't a straight line, and state estate taxes vary. Use it to see the direction, then work out the details with your estate attorney and CPA.

General information, not tax or legal advice. Exemptions rise with inflation and can change. This is a simplified projection that ignores state estate taxes and assumes constant growth. Consult your estate attorney and CPA.