Every year, the tax law gives families a straightforward way to move wealth out of their estate without gift tax consequences: the annual exclusion gift. It’s easy to overlook because it’s “routine,” but over time it can shift millions of dollars tax-free — especially when paired with an irrevocable gifting trust.
With 2026 around the corner, now is the perfect moment to review the limits and consider whether your gifting strategy is working as hard as it could.
1. What are the 2026 Annual Exclusion Amounts (Including a Key Spousal Exception)?
For tax year 2026 (and 2025), the annual exclusion for gifts remains $19,000 per recipient. In other words, you can give up to $19,000 to as many individuals as you want in 2026 without using any of your lifetime exemption and without owing any gift tax. Married couples can “gift-split,” allowing them to give $38,000 per recipient in 2025 and 2026. However, it’s important to note some limitations on gifts to a spouse who is not a U.S.. For calendar year 2026, that special exclusion increases to $194,000, up $4,000 from 2025. This “non-citizen spouse” exclusion is a long-standing exception to the normal unlimited marital deduction rules, and the amount is indexed for inflation each year.
2. Why Annual Exclusion Gifting Is Worth Doing Every Year
Because the exclusion resets annually, it’s a repeatable, compounding strategy. Families who use it consistently can reduce their taxable estate dramatically over time.
For example, a married couple with 2 children and 3 grandchildren can gift $38,000 to each beneficiary.
Do that over 10 years, and that’s $1.9 million moved out of the estate, plus all future appreciation on those transferred assets — without touching your lifetime exemption.
3. Direct Gifts to Beneficiaries: Great When the Fit Is Right
Outright annual exclusion gifts are often ideal when beneficiaries are:
- mature and financially responsible,
- not facing creditor or divorce risk,
- and you’re comfortable with them having immediate control.
Direct gifts are also convenient for practical goals like:
- supporting a down payment on a home,
- helping pay off student loans, or
- boosting savings.
If your beneficiaries are good stewards and your goal is simplicity, direct annual exclusion gifts can be perfect.
4. The Trust Advantage: Turning Routine Gifts into Long-Term Planning
Direct gifts are simple — but they come with one big tradeoff: once the money is gifted, control and protection are gone. That’s where irrevocable gifting trusts shine. A well-designed irrevocable trust lets you make annual exclusion gifts while also adding guardrails, such as:
Asset protection
Trust assets can be insulated from:
- creditors and lawsuits,
- divorcing spouses,
- bankruptcy,
- and sometimes even poor financial decisions.
This protection is impossible with outright gifts once funds land in a beneficiary’s personal account.
Control over timing and use
Trust terms can specify:
- when distributions are allowed,
- for what purposes (health, education, support),
- future education expenses,
- and whether a trustee must approve them.
That’s especially valuable for young beneficiaries, blended families, or recipients you’d like to protect from “too much, too soon.”
Multi-generational planning
Instead of each gift being “spent and gone,” trust-based gifting can preserve wealth for children and grandchildren, helping families build lasting legacies.
5. How Trust Gifts Still Qualify for the Annual Exclusion
To qualify for the $19,000 annual exclusion, a gift must be a “present interest,” meaning the beneficiary has a current right to benefit from it.
Most gifts to irrevocable trusts would normally be treated as future-interest gifts (not eligible). The solution is to structure the trust with Crummey withdrawal powers.
In short:
- You gift to the trust.
- Beneficiaries receive written notice giving them a temporary right to withdraw their share.
- If they don’t withdraw, the assets remain in trust under your rules.
Because beneficiaries could withdraw immediately, the IRS treats the gift as a present interest, allowing annual exclusion treatment.
6. A Quick Compliance Reminder for Trust Gifting
To keep annual exclusion trust gifts airtight:
- send Crummey notices on time (your attorney normally can prepare them for you),
- keep proof of delivery/receipt, and
- track gifts by beneficiary each year.
Good administration is what turns a great legal strategy into a durable tax strategy.
Direct annual exclusion gifts are a great tool but when families want asset protection, structure, or long-term oversight, making those same gifts to an irrevocable gifting trust often delivers dramatically more value. If you’re considering year-end 2025 gifts or a 2026 gifting plan, this is a great time to coordinate amounts, beneficiaries, and whether a trust would better serve your goals.
If you, a friend, or a loved one needs help establishing, updating an estate plan or discussing gift planning, we’re here to help. Contact our Intake Department at 760-448-2220 or visit us online at www.geigerlawoffice.com/contact.cfm. We proudly serve families across California from our offices in Carlsbad (San Diego County) and Laguna Niguel (Orange County).
