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Gifting strategies can be part of your retirement financial planning

by Alliance America
September 29, 2023


In the world of retirement financial planning, a gifting strategy can play a key role. This proactive approach to asset management is not just about ensuring a comfortable and secure life post-retirement, but it also revolves around the thoughtful process of transferring assets or wealth to beneficiaries or charities during one’s lifetime, reflecting your values, priorities and visions.

Gifting strategies encompass a variety of actions, including the strategic use of gift tax exclusions, philanthropic contributions, family support provisions and the meticulous execution of estate planning goals. These strategies are instrumental in maximizing financial benefits for both the giver and the recipient while also providing the giver a degree of control over how their assets are allocated and used. A well-orchestrated gifting strategy serves as a powerful tool in asset protection, tax minimization and in providing support to loved ones and charitable endeavors, allowing you to make meaningful contributions that resonate with your principles and aspirations.

What is a gifting strategy?

coins stacked in different heights from smallest to largest

A gifting strategy, as it pertains to retirement financial planning, is a deliberate and strategic approach to transferring assets or funds to beneficiaries during one's lifetime. It involves careful consideration of various factors such as the gift tax exclusion, asset protection, family support and estate planning goals.

By implementing an effective gifting strategy, individuals can proactively manage their wealth while maximizing benefits for both themselves and their recipients. One key aspect of a gifting strategy is understanding the gift tax exclusion.

The Internal Revenue Service (IRS) allows individuals to make annual gifts up to a certain amount without incurring gift taxes. As of 2023, this amount stood at $17,000 per person or $34,000 for married couples filing jointly.

Gifts falling within these limits are considered exempt from the gift tax and do not impact the lifetime estate tax exemption. In addition to the annual gift tax exclusion, there are other special gifting rules that individuals should be aware of when formulating their strategy.

For instance, contributions made toward qualified educational expenses or medical expenses on behalf of another person are generally exempt from gift taxes under specific conditions. Understanding these nuances can help individuals leverage gifting opportunities while minimizing potential taxation.

It is important to note that if a person receives a gift exceeding the annual exclusion limit, it does not mean that they will be subjected to immediate taxes. The excess amount simply reduces the donor's lifetime estate tax exemption ($12.92 million in 2023), potentially impacting any future estate tax liability upon their passing.

Overall, integrating a gifting strategy into retirement financial planning offers numerous benefits beyond tax implications alone. As noted, a gifting strategy can promote family support by providing loved ones with financial assistance during your lifetime instead of solely relying on inheritances after your death.

Furthermore, strategic gifting may help reduce your taxable income during retirement and support charitable causes that hold personal significance to you. By working with a financial professional and considering the use of financial tools like trusts, individuals can tailor their gifting strategies to align with their unique circumstances, asset portfolio and long-term financial goals.

How can a trust be used as part of your gifting strategy?

Using a trust in crafting a gifting strategy as part of retirement financial planning can help protect assets, minimize taxes and enable and the strategic and timely transfer of assets.

When assets are transferred to a trust, they are generally shielded from creditors, lawsuits and other financial vulnerabilities of beneficiaries, ensuring that the intended recipients receive the maximum benefit from the gifts.

Trusts can significantly reduce or even eliminate estate tax liability. By strategically placing assets within a trust, one can utilize their estate and gift tax exemptions efficiently, safeguarding the wealth from substantial tax implications when transferring assets to heirs or beneficiaries.

Controlled asset distribution is another benefit of using a trust. Trusts enable grantors to dictate the terms under which the assets are distributed to the beneficiaries. This controlled distribution can be particularly helpful when the beneficiaries are minors or individuals who may not manage a substantial inheritance prudently.

What is the gift tax exclusion?

stack of money labeled gift tax exclusion

The gift tax exclusion is an essential concept to understand when considering gifting strategies as part of retirement financial planning. The gift tax exclusion refers to the amount of money or property that an individual can give to another person without incurring any gift tax liability. It serves as a valuable tool for individuals seeking to transfer assets while minimizing their estate tax burden.

As mentioned, for married couples, each spouse has their own separate annual exclusion, meaning they can collectively as of 2023 give up to $34,000 per recipient annually. The purpose of the gift tax exclusion is twofold.

First and foremost, it allows individuals to provide financial support to family members or loved ones during their lifetimes without depleting their estate or triggering estate taxes upon their death. By utilizing this exclusion effectively, individuals can strategically distribute assets over time and potentially reduce the value of their taxable estate.

Moreover, the gift tax exclusion also plays a crucial role in planning for required minimum distributions (RMDs) from retirement accounts. Once an individual reaches the age of 73, they must begin taking RMDs from their qualified retirement accounts such as IRAs and 401(k)s.

By strategically gifting assets prior to reaching this age limit, individuals may be able to lower future RMD amounts and potentially reduce income taxes associated with those distributions. It's important to note that exceeding the annual gift tax exclusion does not automatically result in paying a gift tax.

Rather than immediately facing a tax liability, exceeding the annual limit simply reduces an individual's lifetime exemption from both estate and gift taxes. Therefore, if you exceed the annual limit, you will need to file a gift tax return, and the excess amount will be deducted from your lifetime exemption.

Only when your lifetime gifts exceed the exemption amount do you start incurring gift taxes. Understanding the intricate details of the gift tax exclusion is crucial for effective gifting strategies as part of retirement financial planning.

By leveraging this exclusion wisely, individuals can optimize their estate plans, protect their assets, provide for family support or charitable endeavors and potentially reduce their overall tax burden during retirement and beyond.

Are there special gifting rules?

When it comes to gifting as part of retirement financial planning, it is important to understand that there are certain special rules that govern these transactions. These rules are designed to ensure fairness and prevent abuse of the gifting system.

Beyond the gift tax exclusion, another special rule relates to gifting as a means of asset protection and estate planning. Retirees may choose to establish trusts or utilize other estate planning techniques in order to protect their assets from potential creditors or ensure an orderly distribution after death.

Gifting can be an effective strategy within this context as it allows retirees to transfer assets out of their own name and into the ownership of a trust or other entity. Additionally, charitable giving can also play a significant role in retirement gifting strategies.

Not only does charitable giving provide retirees with opportunities for philanthropy and supporting causes they care about, but it can also have potential tax benefits. Donations made directly from retirement accounts or through specific charitable vehicles like donor-advised funds may enable retirees to receive an income tax deduction while also fulfilling their charitable intentions.

Understanding the special rules surrounding gifting as part of retirement financial planning is crucial for maximizing its benefits and minimizing any potential risks. By being aware of annual gift tax exclusions, asset protection strategies involving trusts or other entities, and the potential tax advantages of charitable giving, retirees can develop a well-rounded gifting strategy that aligns with their overall retirement goals and priorities.

What happens if a person receives a gift over 17K?

someone receiving money as a gift

Receiving a gift over $17,000 can have implications for both the recipient and the donor. From a tax perspective, if an individual receives a gift that exceeds the annual exclusion amount of $17,000, they are required to report it to the Internal Revenue Service. However, it's important to note that just because a gift exceeds this threshold does not necessarily mean that taxes will be owed.

When an individual receives a gift over $17,000, it may trigger the need to file a gift tax return. The donor is responsible for filing this return and paying any potential gift tax owed.

However, in most cases, the actual payment of gift tax is not required due to several factors. One such factor is the lifetime exemption for gifts and estates. The lifetime exemption acts as a safety net by allowing individuals to give away significant amounts during their lifetime without incurring any immediate tax liability.

Additionally, even if the donor has exhausted their lifetime exemption or chooses not to use it all at once, they can still utilize other strategies such as gifting directly to educational institutions or medical providers on behalf of someone else without incurring any gift tax liability. Receiving gifts above $17,000 may also impact one's eligibility for certain government benefits like Medicaid.

Medicaid has strict asset and income limits that individuals must meet in order to qualify for long-term care coverage. Therefore, receiving substantial gifts could potentially disqualify someone from Medicaid eligibility if they exceed these limits.

It's essential to consult with an experienced financial professional or estate planning attorney when considering gifting as part of retirement financial planning. While receiving a gift over $17,000 may require some additional reporting obligations and could have implications on taxes or government benefits eligibility; it does not automatically result in immediate taxation or disqualification from benefits.

Each situation is unique, and it's crucial to seek professional advice to fully understand the impact of receiving substantial gifts. Careful planning, including utilizing tools like trusts, can help individuals protect their assets, minimize tax obligations and ensure a smooth transition of wealth for future generations.


Gifting strategies can play a critical role in retirement financial planning. By utilizing the gift tax exclusion and understanding the special rules surrounding gifting, individuals can optimize their wealth transfer while minimizing potential tax burdens.

Gifting can be an effective way to reduce taxable income and assets, particularly for those who have substantial wealth and want to plan for estate tax purposes. Moreover, gifting provides an opportunity for individuals to support their loved ones and various charitable causes during their lifetime.

By leveraging gifting techniques such as establishing trusts or making direct monetary gifts, retirees can contribute to the financial well-being of their families while maintaining asset protection. It is important to keep in mind that gifting should be done with careful consideration of one's overall financial planning objectives.

While it may be tempting to transfer large sums of money or property as gifts, it is essential to strike a balance between meeting family support needs and ensuring one's own financial security throughout retirement. A well-thought-out gifting strategy can enhance retirement planning by reducing taxable income and assets, optimizing estate tax planning, providing for family members' financial security, and supporting charitable causes.

By consulting with qualified professionals such as estate planners or financial advisors knowledgeable in this area, retirees can tailor their gifting strategies to align with their unique goals and circumstances. So embrace the power of strategic gifting – it not only leaves a lasting legacy but also brings peace of mind knowing that your loved ones will be supported even after you have entered your golden years.

Alliance America can help

Alliance America is an insurance and financial services company dedicated to the art of personal financial planning. Our financial professionals can assist you in maximizing your retirement resources and achieving your future goals. We have access to an array of products and services, all focused on helping you enjoy the retirement lifestyle you want and deserve. You can request a no-cost, no-obligation consultation by calling (833) 219-6884 today.

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