How to Give Money Away to the Ones You Love

Tyler Anderson profile photo

Tyler Anderson, CFP®

President
Mint Hill Wealth Management
Office : 833-421-1140

Everyone’s favorite gift is money, but it can be the trickiest thing to give. That’s especially true if you’re a parent or grandparent looking to make a large financial gift to your offspring with no regrets.

“If it’s truly a gift, you have to give up almost all of the control,” says Justin Flach, a managing director at U.S. Bank’s wealth strategy unit. That doesn’t mean you can’t be smart about it, however, whether in the timing, the amount, or the manner you give. 

As with all big money decisions, first think through why you’re giving and what you hope to achieve. “Understand the why,” says Britta Ferguson, a financial advisor at Wealth Enhancement. “Once you know all of that, then coming up with how to give is the easy part.” 


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A financial advisor can help you sort through the implications of a gift, from how much you can afford without compromising your own financial future to how to minimize taxes and other hassles for both you and your loved ones. It’s also important to communicate with those you give money to how it will work, especially if you choose noncash options they can’t access immediately. 

Here are four ways to give money to loved ones.

Cash Is Still King

The simplest way to give in 2024 is with a cash gift of up to $18,000. That’s because there are no implications either for you or the recipient come tax time. If you’re married, both you and your partner can give $18,000 each to qualify for the gift tax exclusion. You can give up to this amount to an unlimited number of people without telling the Internal Revenue Service.

If you want to give any one person more than $18,000 this year, you need to report the gift to the IRS using Form 709, filed with your regular tax return. You don’t have to pay taxes on it, and neither does the recipient, but the amount above $18,000 will be applied to the current lifetime gift exemption limit of $13.61 million. Anything above that will be taxed at your regular tax rate. There are a few exceptions, however, including directly paying someone’s tuition or medical bills as well as gifts to a political organization.

One reason to give money this year or next is that the lifetime limit could revert to pre-2018 levels of around $5 million plus inflation unless Congress acts to reinstate the higher limit. In 2025, the annual gift tax exclusion will go up to $19,000 and the lifetime limit will be $13.99 million.

Stocks or Other Investments Are Also Nice

With the stock market on fire in 2024, you might want to give some stock to a loved one. While the same $18,000 gift tax exclusion applies, this option is a little more complicated in part because you need to make sure the recipient has a brokerage account for depositing the stock.

The other wrinkle is taxes. If you are gifting stock or another financial asset that has appreciated in value, then your recipient gets stuck with the tax bill on those gains once they sell. 

Say you bought the stock for $1,000 some years ago, but it is now worth $10,000 and you want to give it away. In that case, you aren’t really giving them $10,000. You’re giving them $10,000 minus taxes on the $9,000 in accrued value. If you’re giving to a minor, some of those gains can be taxed at their parents’ tax rate even if the child has no other income.

“Under current law, it’s better to give cash,” says U.S. Bank’s Flach. The exception is if you want to give stock to charity, because they won’t have to pay taxes on the profits if they are registered as a 501(c)(3) organization. 

How About a House?

If you want to go big, the gift of a house may be in the cards. Buying it with cash in your own name, then transferring the deed to your intended recipient, is the cleanest way to go about it. (If you bought a cooperative apartment, however, you’ll need co-op board approval and will be transferring your shares instead.) 

Alternatively, you could buy the house and put it in a revocable living trust. Technically, you aren’t giving the house to your child or other loved one. The trust owns it. But this arrangement helps protect the intended recipient in case of divorce and prevent its sale without your consent as long as you’re alive.

If you eventually expect to give them the house when you die, you’ll save them a boatload in capital gains too because of what’s known as a “step up in cost basis.” As long as the home has been held in the trust, the cost basis will be priced as of the home’s value at the date of your death, not the original purchase price. 

“It’s a huge benefit,” says Ryan Viktorin, a certified financial planner and vice president at Fidelity. “A lot of the value of homeownership comes from the wealth generation and the appreciation that comes over time. You want to be really tax savvy.” 

Whichever route you choose, make sure the recipient can afford the maintenance costs. That includes everything from property taxes and insurance to homeowners’ association fees and general upkeep. 

When a Trust Makes Most Sense

Setting up a trust to financially support loved ones can give you even more benefits and control, depending on how they’re structured. Contrary to popular belief, “A trust is not for the ultrarich. It is for the people who want to decide what happens to their money,” notes Ferguson.

A revocable trust, which you can modify at any time, can cost around $1,000 to $5,000 to set up. You can name yourself the trustee and disburse funds to beneficiaries whenever you like. Upon your death, it converts into an irrevocable trust and bypasses the lengthy and public probate process, which can take around 18 months. There are no direct tax benefits to you, but beneficiaries pay lower capital gains on the trust’s assets because their cost basis is adjusted to fair market value at your death.  

Irrevocable trusts are another option, favored by some because they reduce the giver’s taxable estate. They have the added bonus of protecting both the grantor and beneficiaries from creditors so long as the assets are held in the trust. But they’re more complicated and expensive to set up and difficult to change.

You can use either type of trust to set parameters for how funds are disbursed. So if, say, you want to give your daughter $100,000 when she turns 30 to use as she pleases or set aside $50,000 for healthcare expenses for a loved one with a chronic health issue, you can specify that, too. 

Whichever route you choose, remember to take into account family dynamics and relationships. “Make sure you’re overcommunicating to understand the needs of the beneficiary,” says Flach. That’s especially true if you decide to give more to one child than others, for example. 

While giving decisions are ultimately yours, clearly and compassionately talking them through can go a long way toward avoiding hurt feelings and resentment over the long run.

Write to Anita Hamilton at anita.hamilton@barrons.com

This Barron's article was legally licensed by AdvisorStream.

Tyler Anderson profile photo

Tyler Anderson, CFP®

President
Mint Hill Wealth Management
Office : 833-421-1140