Have you received a substantial cash gift and are now worried about a huge tax bill? Perhaps your parents offered you a down payment for a new home. But if Uncle Sam takes a big bite out of it, there will still be a shortfall in the amount required!
The close-knit frum community, with its extensive networks of large families KH, relies especially heavily on family gifting and support. Do taxes get in the way?
Note that we’re going to be addressing the biggie, federal taxes, first, and then circling back to state-level tax implications.
Taxes Are on the Giver
Not to worry. While the government is very aggressive about collecting from wherever it can, recipients of personal gifts definitely have nothing to fear from the IRS. Unlike salaries, investment gains, and even windfalls like lottery winnings, recipients of gifts (or inheritances of estates) of any size don’t have to pay the government a dime. While the federal gift and estate taxes are now 40%, the payment obligation falls on the giver or the estate, not the recipient.
Two Massive Loopholes
But wait. Are you saying that GIVERS of gifts may be taxed 40% for their generosity?!? And how worried should people be about the federal “death” tax?
Well, in theory, these taxes could be owed; however, there are two massive loopholes in the federal gift/estate tax: the lifetime exemption and the annual gift exclusion. When combined, even gift-givers or estates of massive sums can often reduce the gift tax to zero or close to it.
Regular Yossis definitely don’t have to be concerned with them at all. As you can see in the image below, out of the millions who die annually in the USA, only a couple of thousand pay any estate tax. Here’s why.
The $15M Lifetime Exemption Loophole
While there is technically a hefty tax on gifts, whether before or after death (via an estate tax on inheritances), over the past few decades, a gargantuan exemption loophole was put in place that allows each person to gift or leave behind a huge dollar amount before the tax kicks in.
In recent years, the amount shielded from gift and estate taxes has been consistently raised; in 2026, $15 million per person is exempt! (Barring new legislation, that number is indexed to inflation.)
This gigantic exemption expansion explains why the number of estates subject to taxation has collapsed from over 50,000 in 2001 to just a few thousand in recent years. At this point, a couple can give or pass on up to a lifetime total of $30 million to others tax-free! On this basis alone, the vast majority of families won’t be affected by federal gift or estate taxes. Very few have that kind of money.
The Annual Exclusion Loophole
But, sometimes, even a $30 million loophole isn’t big enough, right? And, even for those who know they’ll likely not max out their lifetime exemption, there’s a paperwork burden to tracking your lifetime gifting exemption calculations and filing forms with the IRS. A pain in the neck.
Fortunately, there is a much simpler second workaround for the gift tax, the annual exclusion.
Annual gifts of up to $19,000 (in 2026) per giver and per receiver are entirely excluded from the whole issue of gift taxes. No taxes are owed, and it doesn’t lower your overall $15M lifetime exemption. And because gifts excluded under the annual limit don’t affect your lifetime exemption, neither the giver nor the taker has to track or report them to the IRS.
Huge Gifting Enabled
For the overwhelming majority of people, the annual exclusion alone will be more than sufficient to give whatever they want without any tax-related issues. Remember, the annual exclusion is per giver and per recipient. See how that adds up.
In 2026, a father can give his son and daughter-in-law $19,000 each, and his wife can do the same. That’s $76,000 ($19,000 X 4) of gifts excluded in one swoop. By including gifting to grandchildren and spreading it out over multiple years, you can easily give your family six or even seven figures annually without any tax issues. The $19,000 annual exclusion makes the gift tax practically moot for most.
Reich Estate Planning
But even the rich can efficiently combine the lifetime exemption and the annual exclusion to pass on enormous sums to their families without worrying too much about gift and estate taxes.
Imagine the “Reichs”, a very wealthy couple with five children, each married spouses, and 40 grandchildren. Every year, both Mr. and Mrs. Reich can give each of their 50 descendants $19,000, which totals $1.9 million annually tax-free (Mr. Reich’s 50 x $19,000 plus Mrs. Reich’s 50 x $19,000 = $1.9 million). By doing this from age 60–80, the total excluded amount ($38 million) overshoots and adds to the already considerable $30M lifetime exemption, which they can also utilize.
Perhaps they don’t want to give away that much in their lifetimes, and their estate attorneys will recommend other avenues to manage their estates. But any way you look at it, the much-derided federal “death tax” clearly has much more bark than bite.
What about the State Side?
Until now, we’ve been discussing the topic from the federal perspective. Gift and estate tax law gets more nuanced once you consider state law. Gifts beneath the $19,000 exclusion levels, the most common concern, are still a non-issue for virtually all.
But, a bunch of states, including NY and MD, where many readers live, do have estate taxes with much lower exemption levels than Uncle Sam’s. See the chart below.
Especially given the price of real estate in NYC, it’s not particularly difficult for people who are solid long-term savers to run into state-level estate tax concerns. Leaving part of your estate to a bunch of profligate state politicians is a very unattractive prospect.
Seek Professional Guidance
Anyone who thinks they may bump into state tax issues, whether state or federal, should definitely consult with proficient estate attorneys. Despite the significant opportunities for the mega-wealthy to minimize estate taxes, the image above makes clear that thousands of estates DO get caught up in the “death tax”. On average, they are paying $6 million to Uncle Sam!
Anyways, most families, regardless of wealth level, need to consult estate planning professionals to ensure their wills and medical directives are in place. For many reasons, overall estate planning is a must, and this is not the place to skimp.
Pick Up and Go?
There are myriad approaches and tactics to managing estate tax issues, beyond the two loopholes discussed here. One is moving to states or even countries that don’t have estate taxes. Most notably in this category is the state of Israel, which, despite pretty onerous income tax rules, doesn’t tax gifts and leaves your money alone after 120. Another reason to keep the holy land top of mind!
Please remember that this article is for educational purposes. Discuss your personal circumstances with your tax and legal advisors.
Also, note that government assistance programs have their own rules regarding gifts, which should be closely researched and complied with.
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