If you have a high-value estate that is preventing you from being able to obtain Medicaid or you are trying to minimize the risk of estate taxes, one of the things you can do is start to give gifts to those you love.

Gifting assets gives you an opportunity to reduce your taxable estate, which may make your estate smaller and less likely to go through probate. On top of that, your estate will be less likely to be taxed, and you may be able to see the enjoyment from others using the gifts you gave away before you pass.

Gifts are allowed, up to a point, without taxation

If you want to give gifts to reduce the value of your estate, you can do so. You can give each person you know up to $15,000 per year without taxes. If a gift is under $15,000, you don’t have to report it to the IRS on the 709 Gift Tax Form, either. Using this strategy, you may be able to reduce your estate significantly while giving your assets to those you care about.

How does this work in practice? Here’s an example.

If you have three children and are married, you, as a married couple, may give your children up to $30,000 each (or assets up to that value) before you will face taxation. That’s $90,000 less in your estate, and that reduction may help you qualify for certain benefits programs or support in the future.

The reduction on taxes is only true up to the lifetime exclusion amount, $11.7 million in 2021, but until you hit that limit, you’ll be able to significantly reduce your tax burden.

If you give more than the amount listed for an exclusion, you will face taxes on the fair market value of the gift at the time it was given.

This is something to consider if your estate is approaching $11.7 million and may be taxed or if you are simply trying to make sure your loved ones can enjoy your assets before you pass away. It is normal to pass on gifts, so the process, while complex, is something to become familiar with when you’re working on your estate plan.