The federal government closed this “loophole” a long time ago. While the estate tax was introduced in 1916, a gift tax followed in 1932 and has been in place ever since.
Today, the federal gift tax and estate tax are unified, meaning they share a single lifetime exemption.
- In 2025, the federal unified exclusion is $13.99 million per person.
- Married couples can combine their exemptions, protecting up to $27.98 million with proper planning.
Here’s how it works: if you give $3 million in taxable gifts during your lifetime, your remaining estate exemption would be $10.99 million. Large lifetime gifts don’t eliminate estate taxes — they reduce your exemption.
Annual Gift Tax Exclusions
In addition to the lifetime exemption, the tax code allows for smaller, tax-free gifts each year.
- In 2025, you can give $19,000 per person without using your lifetime exemption.
- Married couples can “split” gifts, giving $38,000 per recipient per year.
Certain payments are also excluded entirely:
- Medical expenses paid directly to a provider
- Tuition payments made directly to an educational institution
These exclusions make it possible to reduce the size of your taxable estate over time without negative tax consequences.
Strategic Gifting Approaches
For larger estates, more advanced planning tools may be necessary:
- Gift splitting – Doubles the annual exclusion for married couples.
- Irrevocable Life Insurance Trusts (ILITs) – Allows insurance proceeds to pass outside your estate.
- Family Limited Partnerships (FLPs) – Transfers business or investment interests at a discounted value.
- Grantor Retained Annuity Trusts (GRATs) – Shifts asset appreciation to heirs with reduced tax impact.
These strategies require careful legal and tax guidance, but they can be powerful tools for minimizing estate taxes and ensuring smooth wealth transfer.
Connecticut’s Estate and Gift Tax
Unlike most states, Connecticut imposes both an estate tax and a gift tax. The state’s transfer tax exemption currently matches the federal amount at $13.99 million.
This makes planning especially important for Connecticut residents with high-value estates or families who wish to pass down significant assets.
The Bottom Line
Giving your children advance inheritances will not automatically shield your estate from taxes, but smart gifting can reduce the taxable value of your estate and support your loved ones during your lifetime.
With the right strategies, you can provide for your family, preserve your legacy, and minimize tax burdens.
We Are Here to Help
At the Law Offices of Charles L. Kurmay, we help families across Connecticut design comprehensive estate plans that balance immediate needs with long-term goals.
Call us today at (203) 380-1743 to schedule a confidential consultation and learn how we can help you protect your legacy.
