In 2023, Steve and Carol combine their $17,000 annual exclusions so that their three children and their children’s spouses, along with their six grandchildren, each receive $34,000. The result is that $408,000 is removed from the couple’s estates free of taxes.
If the same amounts were transferred to the recipients upon Steve’s or Carol’s death instead — and no estate or GST tax exemption was available — the tax hit, at the current 40% rate, would be $163,200 in federal estate taxes and $81,600 in GST taxes. So the annual exclusion gifts could potentially save the family $244,800 in taxes. If they maximize their annual exclusion gifts each year, just think about how much tax they could save!