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Under federal law, each person can make tax-free gifts of up to $19,000 per person, per year. So as a married couple, you can give $ 38,000 per year to as many people as you want, usually without the necessity of filing a gift tax return. More importantly, these gifts do not reduce your lifetime estate and gift tax exemption of $15 million (the amount which is in effect for 2026). If you make a gift of more than $19,000 per person as a single individual, you will not pay a tax, unless the cumulative value of the reportable gifts you have made exceed $15 million. Of course, this annual gift giving exclusion amount provides a simple and effective way to reduce your taxable estate.
Most states also have their own scheme of gift and estate tax. In New York, for example, the estate tax exemption is currently $7.35 million per person. However, if you are a married couple, then without some trust planning, the figure is essentially $7.35 million as a couple. For example, if a wife passes away leaving all of her assets to her husband, there is no estate tax as long as the husband is a U.S. citizen. However, by leaving all of her assets to her husband, her $7.35 million exemption is gone forever. When the husband passes, unless the couple has done proper estate planning, he will have the benefit of only one $7.35 exemption. A relatively straightforward way to avoid that result is my having credit shelter trusts (also commonly referred to as a bypass trust) contained in ones wills or trust.
One other important note. New York has an estate tax “cliff”. If the value of your taxable estate exceeds the exemption amount by more than 5%, then the entire estate is taxed–not just the amount over the exemption.
In terms of gift tax, New York State no longer has a gift tax. However, if you die within three years of making a gift, the value of the gift comes back into your taxable estate.
There are a number of states that have no gift tax nor estate tax. Florida is one example. Other states are less generous in terms of the exemptions offered. Therefore, if you plan to move to another state, you should seek legal counsel.