Gift splitting can be a valuable estate planning tool, allowing you and your spouse to maximize the amount of wealth you can transfer tax-free. But in some cases, it can have undesirable consequences, so be sure that you understand the implications before making an election to split gifts.

Gifts of separate property

Gift splitting is helpful if you wish to minimize taxes on gifts of separate property (as opposed to jointly owned or marital property). Suppose, for example, you give your child $32,000 in stock that’s your separate property. Your annual gift tax exclusion shields $19,000 of that amount from gift taxes, but the remaining $13,000 is taxable. However, if you and your spouse elect to split gifts, half of the gift is deemed to be from your spouse and is shielded from tax by his or her 2025 exclusion.

It’s important to understand that when you make an election to split gifts on a gift tax return, it applies to all gifts made by you or your spouse during the year.

Because the exemption is scheduled to return to an inflation-adjusted $5 million in 2026, many people are making large gifts to their loved ones before the current exemption sunsets. But if you elect to split gifts, you risk losing the benefit of the increased exemption.

Follow the rules

It’s important to understand the rules surrounding gift-splitting to avoid unintended — and potentially costly — consequences. We’d be pleased to provide additional details and answer any questions regarding making gifts.  Contact us or visit our related service page today.

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