Gifting assets to children or grandchildren can be a smart part of an estate or education planning strategy, but it’s important to understand the tax rules involved.

Effective January 1, 2025, individuals can give up to $19,000 per recipient per year without needing to file a gift tax return. Married couples can combine their annual exclusion and gift $38,000 per year to each recipient tax-free. Gifts exceeding these limits require the donor to file Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return.

Although a gift tax return may be required, no gift tax is actually due unless the cumulative gifts exceed the lifetime exemption, which is approximately $13.99 million per person in 2025. This means most people won’t owe gift tax—but large gifts do reduce the amount of estate tax exemption available later.

Gifting cash is simple, but gifting appreciated assets—such as stocks or real estate—has additional implications. When you gift an appreciated asset, the recipient receives your original cost basis. This means if they later sell it, they may owe capital gains tax based on your original purchase price, not the value at the time of the gift.

Special rules apply when gifting to grandchildren or others who are more than one generation removed. If the gift exceeds certain thresholds, it may be subject to the Generation-Skipping Transfer (GST) tax, which mirrors the gift tax but has its own exemption limit.

One tax-efficient strategy is contributing to a 529 education savings plan. You can front-load five years of gifts (up to $95,000 for individuals or $190,000 for couples) into a 529 plan without triggering gift tax, as long as no additional gifts are made to the same beneficiary during that period.

Annual gifting can be a powerful tool to reduce your taxable estate—but it must be done with a clear understanding of IRS rules.

Please contact your Dent Moses advisor if you have questions or wish to discuss specifics.