An inheritance rarely arrives when a family needs it most. That reality leads some of the people I work with to consider gifting while living, whether that means paying college tuition, helping with a home purchase, or funding a family trip. Before reviewing tax rules and annual limits, I believe effective gifting begins with a simple question: what do you want this gift to do?
Start With What You Want the Gift to Do
When someone tells me they’re thinking about a gift, my first question is what the giving looks like in their mind. Are you hoping to orchestrate a family trip everyone remembers, hand an envelope to your son over lunch, or make this a Christmas gift the whole family sees? I believe the best gifts are the ones where the giver feels something in the giving. When money moves for no reason other than the calendar, it starts to feel like a transaction for both sides.
Say Something When You Give It
A gift without an explanation can put the recipient in an awkward spot, wondering whether this will happen again next year and if anything is expected in return. Those unasked questions can linger, and often take some of the pleasure out of receiving.
This is why I encourage clients to write a letter to go with the gift, explaining why you’re giving and what you hope it makes possible. If you have expectations about how the money gets used, mention them in the letter, because once a gift is in someone else’s hands, the decisions belong to that person. Families tend to hold on to those letters long after they’ve forgotten the amount. We also plan the mechanics around when you intend to give, since a gift meant for Christmas gives us no reason to move shares in March.
The Fairness Question
Families aren’t evenly shaped, and giving runs into that reality quickly. When one of your children has four children, and another has one, an equal gift to every grandchild means one household receives four times the other. Some families give equally per grandchild, and some per household, and neither is wrong. People feel far better about the arrangement when they’ve chosen it deliberately, rather than discovering the imbalance a few years in and wondering how to change course without causing hurt feelings.
When the Gift Is Stock Rather Than Cash
Sometimes the reason for giving shares has nothing to do with tax efficiency. I’ve worked with grandparents who wanted their grandchildren to own stock in a particular company because it gave the kids something to follow and a window into what patient investing looks like over years, not weeks. The shares became a connecting point across generations, and the financial return was almost beside the point.
It’s good to know the tradeoff first. Shares that pass to your heirs at death receive a step-up in cost basis that erases the built-in capital gain, while shares given away during your lifetime carry that gain along to the recipient. I’ve had clients hear this and move ahead anyway because what they wanted from the gift was worth more than the tax result; my job is to make the tradeoff clear so the choice is informed.
What It Costs and Where It Comes From
When people map out retirement spending, they account for travel, housing, and healthcare, while the money they hand to their children and grandchildren doesn’t always make that list. For some families, it turns out to be larger than any other line in the plan. A dollar that leaves your portfolio has left it regardless of what it paid for, so I want gifts in the withdrawal picture before we discuss amounts.
In 2026, you can give $19,000 per recipient without filing a gift tax return, or $38,000 if you’re married and elect to split gifts. A gift within that limit creates no tax bill for you or the recipient, which surprises people who assume their children will owe something on the money.
Gifts above the limit require Form 709, though for most families that is a reporting step rather than a tax bill. The excess counts against your lifetime gift and estate tax exemption, which is $15 million per person in 2026, and tax comes due only after you have given away more than that over the course of your life. Tuition paid directly to a school and medical expenses paid directly to a provider fall outside the annual limit entirely, giving families already helping with education more room than they expect.
Giving With Confidence
What I notice about the families who do this well is how much they enjoy it. They’re present for the graduations, first houses, and trips they paid for, watching what their money made possible instead of only imagining it. My work is helping you understand what that costs and how to share it with your family in a way that feels right to you.
If you’ve been thinking about giving to your family, I’d be glad to talk it through. Call me at (317) 469-2455, email ssteel@deerfieldfa.com, or schedule a time using my online calendar.
Frequently Asked Questions About Gifting Money to Family
How much money can I give someone in 2026 without paying gift tax?
You can give up to $19,000 per recipient in 2026 without filing a gift tax return, and a married couple electing to split gifts can give $38,000 to the same person. The annual gift tax exclusion applies per recipient, so there is no limit on how many people you give to in a year.
Do I have to pay tax if I give more than the annual gift tax exclusion?
Most people who exceed the annual exclusion owe no gift tax. You file IRS Form 709 to report the gift, and the amount above $19,000 counts against your lifetime gift and estate tax exemption of $15 million per person in 2026. Tax is due only after you use up that exemption.
Can I pay my grandchild’s tuition without it counting toward the annual gift limit?
Tuition paid directly to an educational institution is excluded from the annual gift tax limit under the qualified transfer exclusion, and medical expenses paid directly to a provider are excluded the same way. Because these payments fall outside the limit, you can cover a grandchild’s tuition and still give that grandchild $19,000 in the same year.
Is it better to gift appreciated stock during my lifetime or leave it to my heirs?
Leaving appreciated stock to your heirs is usually more tax efficient, because shares inherited at death receive a step-up in cost basis that erases the built-in capital gain. Gifting those shares during your lifetime transfers your original cost basis to the recipient along with the tax on the gain. Lifetime gifting can still make sense when the recipient is in a lower tax bracket, or when your reason for giving now outweighs the tax cost.
How do I know if I can afford to give money to my family?
Count your gifts as part of your total portfolio withdrawals rather than treating them separately from living expenses. Giving that fits within a withdrawal rate your plan can sustain is giving you can continue year after year without putting your own retirement at risk.
About Susie
Susie Steel, CFP®, is the COO and a Senior Shareholder at Deerfield Financial Advisors, where she has dedicated over three decades to providing fee-only wealth management with a deep spirit of service. A multi-year “Five Star Wealth Manager,” she specializes in simplifying complex financial planning to create a nurturing, trusting environment for her clients.
