Lifetime exemption, often called the federal estate and gift tax exemption, is the total amount of assets an individual can transfer during life and at death without incurring federal estate or gift tax, beyond the annual exclusion. The exemption amount is unified between lifetime gifts and transfers at death, and it has changed frequently over time in response to legislation. High net worth clients closely track the exemption because it determines how much wealth they can pass tax free and influences strategies such as lifetime gifting, use of irrevocable trusts, spousal planning, and life insurance funding for anticipated estate tax liability.

In real world estate planning, advisors work with attorneys and CPAs to monitor the current lifetime exemption and potential sunset or legislative changes. When exemption amounts are temporarily high, clients may make large gifts to trusts, family members, or charitable vehicles to lock in benefits, often paired with life insurance in ILITs or SLATs to replace or enhance transferred wealth. Advisors design policies to provide liquidity for projected estate taxes above the exemption or to equalize inheritances when some assets, like a family business, are left to specific heirs. They also help clients understand how lifetime gifting reduces the remaining exemption and how portability between spouses works when filing estate tax returns. By understanding lifetime exemption dynamics and integrating life insurance thoughtfully, producers help affluent families manage tax exposure, fund liquidity needs, and implement long term legacy strategies that can adapt to an evolving tax landscape.