Lifetime Estate and Gift Exemption.
In plain English
The lifetime estate and gift exemption is the running total of money and property you can transfer, either as gifts while you are alive or as an inheritance when you die, before the federal government taxes any of it. Gifts above the yearly gift exclusion count against this lifetime number, and whatever is left of it shields your estate at death. Most families never come close to the limit, so most people never owe federal estate or gift tax. The exemption amount is set by law and indexed each year, and it has changed under recent tax legislation, so confirm the current figure on irs.gov before relying on it.
01Why it matters
If your estate is large enough to brush against this limit, the difference between planning and not planning can be hundreds of thousands of dollars in tax your heirs would otherwise keep.
02The math, step by step
For people who die in 2026, the lifetime exemption is $15,000,000 per person (IRS, tax year 2026). If you give your child a gift this year above the annual exclusion, which is $19,000 per recipient for 2026, the excess is subtracted from that lifetime number. You do not write a check for gift tax until you have used up the entire exemption, which most people never do.
03What this is NOT
The annual exclusion is the smaller amount you can give each person every year with no paperwork at all. The lifetime exemption is the much larger total that gifts above the annual amount slowly chip away at, and it covers what you leave at death too.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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