Leveraging the Gift Tax Exclusion

As of January 1, 2026, the federal estate tax threshold is set at $15,000,000. That exemption amount means that an individual will only need to file an estate tax return, and may be assessed federal estate tax, if their estate exceeds $15 million. For individuals in Summit and in the nearby New Jersey area, there is no longer a state estate tax in New Jersey, which means it is only necessary to consider the federal estate tax and exemption threshold. If you have an estate valued at more than $15 million, it will be important to work with an estate planning attorney to minimize estate tax in the future. One way to think about doing this is by leveraging the federal gift tax exclusion.

The gift tax exclusion is $19,000 for 2026 — the same amount it was in 2025 — and it allows an individual to gift (or give) up to $19,000 per person per year without incurring gift tax. There are a couple of key ways to leverage the gift tax exemption that can help you to minimize potential estate taxes. Consider the following information from our New Jersey estate planning lawyers.

Gifting Up to $19,000 Per Beneficiary This Year and Next (and Beyond)

Are you planning to leave a substantial sum of money to loved ones upon your death? If you are in a position where your estate will need to file a federal estate tax return and may owe estate tax, it may be a good idea to begin gifting that money right now — in your lifetime. As we noted above, you can give up to $19,000 per year and per person.

As such, if you have multiple children and grandchildren, for example, you can begin gifting each of them $19,000 this year, and you can plan to do the same next year and onward (making sure to keep an eye on each year’s gift tax exclusion amount). You can lower the value of your estate, minimizing estate tax and potentially avoiding it altogether.

Gifting for a 529 Savings Plan

If you are expecting any of your intended beneficiaries to use their gifts or inheritances for their education, you may be able to leverage the gift tax exclusion even more. This is particularly helpful if you know that you have a serious illness and may not be here for many more years to gift $19,000 annually, for example.

You can gift up to five times the annual gift exclusion amount per person in a single year into a 529 savings plan. In 2026, that means you can gift $95,000 to a single 529 plan for an intended beneficiary. Though, you should be aware that you cannot use the gift tax exclusion to gift that individual assets for the next five years.

Contact a Summit, New Jersey Estate Planning Lawyer for Help Leveraging the Gift Tax and Limiting Your Estate Taxes  

The gift tax exclusion can be extremely helpful for individuals and married couples in the Summit area who want to reduce their estate tax liability by gifting to their loved ones during their lifetimes. Although the gift tax exclusion has not increased for 2026, as we discussed above, it still offers a way to give a significant amount to multiple loved ones this year (in a way that can reduce your potential estate tax liability), and if you are planning to give to a loved one for their educational expenses in the future, you can give significantly more than that $19,000 exclusion as we noted above. Contact one of the experienced Summit estate planning attorneys at Dempsey, Dempsey & Sheehan today to find out more about how we can help with your estate planning needs in New Jersey.

Source:

irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill