Leaving money or property to a child, grandchild, or other loved one is a wonderful way to support a person you care about. With that being said, there could be tax consequences. It is imperative that you use a property strategy. Gifting wisely can make a big difference. At White & Jocham, we are leaders in asset protection. An Indianapolis estate planning attorney can provide guidance on navigating the annual gifting allowance for seniors and their heirs.
What is the Purpose of Annual Giving? (Estate Planning)
Gifting can be both generous and strategic. Many Indiana families use gifts to transfer wealth, reduce the size of their taxable estate, and assist loved ones financially during life rather than through inheritance later. However, improper gifting can create tax complications and, potentially, even undermine long-term care eligibility. The key is understanding the annual federal gift tax exclusion and how it fits into a broader estate plan. Indiana does not impose its own gift tax, but federal law still applies.
Know the Federal Gift Tax Exclusion
The Internal Revenue Code (IRC § 2503(b)) allows people to give a certain amount each year to as many recipients as they choose without triggering federal gift tax reporting obligations. For 2025, the annual gift tax exclusion is $18,000 per recipient. Married couples can combine their exclusions to give up to $36,000 per recipient annually. Gifts that exceed this threshold must be reported on IRS Form 709. They will count against the donor’s lifetime gift and estate tax exemption. To be clear, that figure is currently $13.61 million per person in 2025 under IRC § 2010(c).
Note: Many routine gifts (tuition paid directly to a school, medical expenses paid directly to a healthcare provider, etc)are not considered taxable gifts under IRC § 2503(e). These exceptions can be used strategically to reduce taxable estates while providing meaningful financial support. Indiana residents should keep detailed records of each gift, including the date, recipient, and amount, to ensure compliance and preserve the full value of their lifetime exemption.
The Federal Gift Tax Reporting Exemption is Based on the Recipient, Not the Giver
You can give up to $18,000 per recipient, per year, without triggering the federal gift tax reporting requirement under IRS regulations in 2025. There is no limit on the number of people you can give that amount to. For example, you could give $18,000 to each of your three children, $18,000 to each of your grandchildren, and $18,000 to a friend. All of those gifts can be given completely tax-free and without filing Form 709. There is no reporting requirement for taxes as long as the recipient receives no more than $18,000.
The $18,000 limit applies individually to each recipient, not as a total across all gifts. If any gift to one person exceeds $18,000, you must report the excess to the IRS. It is a cumulative total for the year. The first $18,000 is covered by the annual exclusion and is completely tax-free. The remaining $2,000 must be reported to the IRS on Form 709
A Gift in Excess of $18,000 Does Not Trigger Tax Liability; it Triggers Reporting Requirement
It is important to understand how the federal gift tax actually works. If an Indiana resident gives more than $18,000 to any one person in 2025, the excess must be reported to the IRS on Form 709. However, that does not automatically create a tax bill. The excess simply reduces the giver’s lifetime federal gift and estate tax exemption (which is currently $13.61 million). Only if total lifetime taxable gifts and estate value exceed that amount would federal gift or estate tax be owed. Of course, the exemption is currently quite high, so most Indiana residents never reach that threshold.
Indiana Does Not Have a State-Level Estate Tax
Indiana repealed its state inheritance tax in 2013. Indiana residents are not subject to state-level estate or gift taxes. However, large estates may still face federal estate tax obligations if the total value of lifetime taxable gifts and the estate exceeds the federal exemption amount.
Why Proactive Giving Can Be a Good Long-Term Care Planning Strategy
With long-term care planning, the sooner you take action, the better. Proactive giving allows Indiana residents to transfer assets early (well before a possible need for long-term care arises). Why does that matter? Those assets are not later counted against Medicaid eligibility.
Medicaid’s five-year look-back period under 42 U.S.C. § 1396p(c) means any gifts or transfers made within five years of applying for benefits may trigger a penalty period. That can delay coverage for nursing home care. By planning early and structuring gifts properly, families can reduce the size of their countable estate while preserving wealth for heirs.
Assets transferred outside the look-back window are generally protected, provided the transfers were legitimate and well-documented. Early, consistent gifting also enables donors to take advantage of annual federal gift tax exclusions and avoid rushed or disqualifying last-minute transfers. When done strategically, proactive giving balances long-term care planning, family support, and asset preservation under both federal and Indiana law.
We are Leaders in Estate Planning and Elder Law in Indiana
Are you considering making a generous gift to a child, grandchild, or other loved one? You undoubtedly want to be able to leave them as much as possible, without exposing yourself or your beneficiaries to any avoidable tax liability. At White & Jocham, we are proud to be leaders in estate planning and elder law in Indiana. Our law firm can help you develop the best strategy to give wisely. Your initial consultation with our Indiana estate planning lawyer is completely confidential.
Call Our Indiana Estate Planning Lawyer Today
At White & Jocham, our Indiana estate planning attorney has the skills and experience to help you develop the most effective gifting strategy. We are proactive and solutions-focused. If you have any questions about gifting strategies, please call us now or contact us online for a confidential consultation. With an office in Greenfield, we offer estate planning and elder law services in Indianapolis and throughout Indiana.
