Life Insurance Gifting: Why Now Can Be the Right Time to Buy a Policy

Understanding Life Insurance Gifting

Life insurance gifting is a strategic way to transfer wealth, provide financial security for loved ones, and potentially reduce estate taxes. By purchasing a life insurance policy and naming a beneficiary—whether a family member, employee, or charitable organization—you can ensure your legacy endures while maximizing tax advantages.

• Higher Gift Tax Exclusions:

In 2025, the IRS increased the annual gift tax exclusion to $19,000 per recipient. Married couples can gift up to $38,000 per recipient tax-free, allowing significant wealth transfer without immediate tax consequences.

• Lifetime Exemption Increase:

The lifetime gift and estate tax exemption is now $13.99 million per individual (or $27.98 million per couple) for 2025, with further increases scheduled for 2026. This means you can make larger gifts—including funding life insurance policies—without incurring federal estate or gift taxes.

• Potential Future Reductions:

These elevated exemption amounts are set to expire at the end of 2025, possibly reverting to much lower levels. Acting now allows you to lock in these favorable limits and avoid future uncertainty.

• Outright Gifts to Beneficiaries:

You can gift up to $19,000 per person annually, removing those assets from your taxable estate. This is especially valuable for policies intended to benefit family members or key employees.

• Irrevocable Life Insurance Trusts (ILITs):

By gifting funds to an ILIT, you can purchase a life insurance policy outside your estate, further reducing estate tax exposure and controlling asset distribution.

• Charitable Giving:

Naming a charity or institution as a beneficiary, or donating a policy, can multiply your generosity and provide immediate tax benefits.

For business owners searching for “employee insurance near me”, gifting life insurance policies can be a powerful tool to attract and retain talent. Providing life insurance as part of an employee benefits package demonstrates your commitment to their financial well-being and can be structured to maximize tax efficiency for both the business and employees.

• Immediate Financial Security:

Beneficiaries receive a guaranteed payout, ensuring their future stability.

• Tax Advantages:

Strategic gifting can reduce your taxable estate and leverage current exemptions for maximum impact.

• Legacy Planning:

Life insurance gifting allows you to see the positive effects of your generosity during your lifetime.

Take Action Now

With the current high exemptions and annual exclusions, now is the right time to consider life insurance gifting. Whether you’re planning for your family, supporting employees, or making a charitable impact, D.M. Johnson Insurance Agency can help you navigate the options and optimize your strategy.

Contact D.M. Johnson Insurance Agency today to explore life insurance gifting and employee insurance near me solutions tailored to your needs.