Giving While Living: How to Gift Money to Children & Grandchildren Without Tax Consequences

For many women, financial planning isn't just about feeling confident in our own future—it's also about creating opportunities for the next generation. Whether it's helping a grandchild with college tuition, supporting an adult child starting a business, or simply passing on wealth during your lifetime, gifting can be a meaningful way to make an impact.

But before you start writing checks, it's important to understand the tax rules around giving. The good news? The IRS allows you to gift significant amounts each year without triggering gift taxes or reducing your lifetime estate tax exemption. With a little planning, you can share your wealth strategically while avoiding unintended tax consequences.

Here's what you need to know about tax-free gifting to your children and grandchildren in 2025.

1. Understand the Annual Gift Tax Exclusion

The IRS allows you to gift up to $19,000 per recipient in 2025 without it counting against your lifetime estate tax exemption. That means you can give up to $19,000 per year, per child, per grandchild—without filing a gift tax return or paying taxes on it.

If you're married, your spouse can also gift $19,000 per person, effectively doubling the amount to $38,000 per child or grandchild per year.

2. Pay for Education and Medical Expenses—Tax-Free

Want to help with college tuition or medical bills? You can pay these expenses directly to the institution without it counting as a taxable gift.

• Tuition: If you write a check directly to a college or private school for tuition, it doesn't count against your $19,000 annual exclusion. This applies only to tuition, not room and board, books, or supplies.

• Medical Expenses: Payments made directly to a hospital, doctor, or insurance provider for someone's medical care are also excluded from gift tax limits.

This strategy is great for grandparents who want to fund education without giving up estate tax benefits.

3. Set Up a 529 College Savings Plan

A 529 Plan allows you to contribute money for a child's or grandchild's education while offering tax advantages. The money grows tax-free, and withdrawals for qualified education expenses are also tax-free.

• Superfunding Option: You can front-load a 529 plan with up to five years' worth of the annual gift exclusion ($95,000 per beneficiary in 2025, or $190,000 if married).

• Why It's Powerful: This strategy allows you to remove a large sum from your taxable estate while still keeping control of the funds.

Some states offer tax deductions or credits for 529 contributions, so check your state's rules.

Please Note: 529 plans come with fees and expenses, and there is a risk they may lose money or underperform. Most states offer their own 529 programs, which may provide benefits exclusively for their residents. Please consider whether the state plan offers any tax or other benefits. Tax implications can vary significantly from state to state.

4. Consider an Irrevocable Trust for Larger Gifts

If you want to gift more than the annual exclusion but still maintain some control, consider setting up an irrevocable trust.

• You transfer assets (cash, stocks, property) into a trust for your children or grandchildren. A trustee (which can be you or someone else) manages the funds according to your wishes.

• Benefits include asset protection, setting conditions for how funds are used, and reducing your taxable estate over time.

A popular option is a Crummey Trust, which allows beneficiaries to withdraw small amounts for a limited time, qualifying the gift for the annual exclusion.

5. Gifting Appreciated Stock Instead of Cash

If you own stocks that have significantly increased in value, consider gifting shares instead of cash.

• If you sell the stock yourself, you may owe capital gains tax. But if your child or grandchild is in a lower tax bracket, they could sell it at a lower tax rate—or even tax-free.

• For example, if you bought Apple stock at $50 per share and now it's worth $200 per share, selling it yourself means you pay capital gains tax on the $150 profit. If your child sells it, their tax bill could be much lower (or zero).

Please Note: This is a hypothetical illustration and is not intended to reflect actual performance. Future performance cannot be guaranteed, and investment yields will fluctuate with market conditions. Investments involve risk and you may incur a profit or a loss.

6. Use the Lifetime Estate and Gift Tax Exemption

If you want to pass on larger sums, know that the current lifetime estate and gift tax exemption is $13.99 million per person in 2025.

• This means you can give away up to $13.99 million in gifts over your lifetime before paying gift taxes.

• If estate tax laws change in the future, taking advantage of this exemption now may help reduce potential tax burdens later.

This exemption is scheduled to decrease after 2025, so now is a great time to plan if you're considering larger gifts.

Final Thoughts: Give with Intention

Giving while living allows you to see the impact of your generosity while also helping your loved ones build their own financial security. Whether it's through annual gifts, tuition payments, or setting up a trust, thoughtful planning ensures that your wealth transfers in a way that aligns with your values and financial goals.

If you're considering a gifting strategy but aren't sure where to start, a financial advisor can help you navigate the tax implications and find the best approach for your situation.

I would be happy to help you navigate these type of questions and provide answers. Feel free to schedule a complimentary financial consultation with me today and let’s talk.

Please Note: The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Lauren Smith and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.