Basics of Gift Splitting for Married Couples

February 3, 2025


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Understanding and utilizing gift splitting for married couples can lead to significant tax savings when it comes to estate planning. However, it’s a nuanced strategy that requires careful consideration. This guide breaks down the basics of gift splitting, its benefits, and key factors married couples should consider before making this election. 

What is Gift Splitting? 

Gift splitting is a tax strategy that allows married couples to collectively allocate their annual gift tax exclusion and lifetime exemption for gifts made to a third party, even if the gift is made entirely by one spouse. Gift splitting for married couples enables them to double the amount they can gift tax-free. 

For example, in 2025, the annual gift tax exclusion allows individuals to gift up to $19,000 per recipient without triggering gift taxes. Through gift splitting, a married couple can combine their exclusions and gift up to $38,000 to the same recipient tax-free. The lifetime gift and estate tax exemption for 2025 has increased to $13,990,000 per individual. A married couple electing gift splitting can give away $27,980,000 (if no prior gifts were made) during 2025 without incurring gift tax.  

How Does Gift Splitting Work? 

To qualify for gift splitting, both spouses must meet the following criteria: 

Marital Status: You must be legally married to each other at the time the gift is made, and each spouse must be a US citizen or resident during the year in which the gift is made 

Consent: Both spouses must agree to split the gift by filing Form 709. New Form 709 for 2024 requires, among other things, that the donor spouse must attach a separate “Notice of Consent” to the donor’s return. The consenting spouse must sign and date the Notice of Consent, which includes a statement that the consenting spouse “is electing to treat all gifts made to third parties as having been made on-half by each spouse.”   

Filing Requirement: A gift tax return (Form 709) must be filed to elect the gift splitting, even if no tax is due 

Spouse Cannot Be Donee with limited exceptions a gift made to your spouse or trust which the spouse is a discretionary beneficiary cannot be split. This includes a gift which the non-donor spouse has a general power of appointment over. 

Non-Community Property: If the gift is from community property each spouse is already considered to have made half of the gift, so gift splitting may not be necessary 

Important Points to Remember: 

  • Filing Requirement: Both spouses must agree to split all eligible gifts for the year and cannot pick which gifts to split and which to not split. 
  • Lifetime Exemption: Gift splitting reduces the lifetime exemption for both spouses if the total value of gifts exceeds the annual exclusion. 
  • Irrevocable Election: Once the election is made, it applies to all gifts within that year and cannot be undone, so strategic planning is critical. 

Benefits of Gift Splitting 

Utilizing gift splitting can offer a range of benefits: 

  1. Tax Savings: Couples reduce the likelihood of triggering gift taxes by doubling the annual exclusion amount. 
  1. Efficient Transfer of Wealth: This strategy allows couples to transfer more substantial assets to their loved ones or trusts early, helping avoid potential estate tax implications later. 
  1. Flexibility in Large Gifts: Couples can transfer significant sums within their lifetime exemptions without taking on additional tax burdens. 

What to Consider When Gift Splitting 

While gift splitting can be advantageous, there are essential factors and potential pitfalls to consider: 

Changes in the Lifetime Exemption  

The federal gift and estate tax exemption recently increased to $13,990,000 per person (as of 2025), however the exemption is set to be automatically halved on January 1, 2026, unless new legislation is passed. By electing gift splitting, both spouses use portions of their lifetime exemptions equally, which may not always be efficient. For example, using gift splitting for amounts under one spouse’s exemption could waste the other spouse’s unused exemption. 

Example 1 – Lifetime Exemption Remains Untouched: 

Jack gifts $38,000 to his child in 2025 when the annual exclusion is $19,000. By electing gift splitting, Jack and his spouse, Jill, treat the gift as $19,000 each, staying within their yearly exclusions. Their lifetime exemptions remain unaffected. 

Example 2 – Reduction of Lifetime Exemption with Gift Splitting: 

Linda transfers $14,000,000 in assets to her child in 2025 when the lifetime exemption is $13,990,000. If Linda and her spouse Tom elect to gift split, they each will record $6,981,000 as taxable gifts (after considering the $19,000 annual exclusion). This could lead to higher gift or estate taxes if the exemption is reduced in 2026 to one half or $7,000,000. For example, if the 2026 exemption is halved both spouses would have nearly zero exemption remaining in 2026; ($7,000,000- $6,981,000) $19,000. However, if Linda and her spouse did not gift split in 2025, Linda would have used approximately her entire exemption in 2025 of $13,990,000; (gift of $14,000,000 – $19,000 annual exclusion) $13,981,000, while her spouse’s exemption of approximately $7,000,000 is preserved. Further if the lifetime exemption is not reduced in half, her spouse’s exemption of $14,000,000 is preserved.   

Divorce Considerations   

  1. The implications can become complicated if a couple divorces after making gift-splitting elections. Any future audits or reviews of past gift tax returns may require cooperation from both spouses.  

Alternative Strategy to Gift Splitting 

  • Interspousal Gifts: Transfers between spouses that are US citizens or residents are unlimited and tax-free, allowing wealthier spouses to provide assets to their partner to make individual gifts without triggering gift taxes. This would preclude the need for gift splitting and could utilize the less wealthy spouse’s unused lifetime exemption. However, there is risk to the unwary that these transfers can be re-characterized as a “Step Transaction” by the IRS. The theory behind the Step Transaction is that if one spouse transfers assets to the other spouse, who immediately gifts those assets to a third party, the IRS may treat it as a single indirect gift from the first spouse, potentially triggering taxes.   

Final Thoughts 

Gift splitting is a powerful tool for married couples seeking to transfer significant wealth tax-efficiently. However, its irrevocable nature and potential for unintended consequences make careful planning a necessity. 

Before making any elections, consult a financial professional or estate planning attorney to ensure the strategy aligns with your broader financial goals and estate plan. By taking proactive steps now, couples can use gift splitting to their advantage while safeguarding family wealth for generations to come. 

Contact Wiss if you’re looking for expert guidance tailored to your unique financial situation. Our experienced team is here to help you navigate complex planning strategies and confidently achieve your goals. Contact us today!


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