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Navigating the Guidelines of Gifting

Many people who have met with a financial professional and estate planning attorney have a well-thought-out plan in place to transfer assets to their beneficiaries upon their death. That’s a critical part of long-term planning, but what if you’d like to give your loved ones money now, while you’re still here to see them use and enjoy it? Or what if your children need financial help in some way and you’re in a position to help them out? Can you gift them the money they need without creating a tax liability for them?

The answer is yes, you can – but you need to pay attention to certain guidelines. You should also speak with a qualified tax professional about your unique situation. The IRS considers a “gift” to be any money freely given to an individual, without something given in return. This can be in the form of cash, stocks or other assets you may transfer to someone else.

For tax year 2017, the IRS allows you to gift $14,000 each year to a designated individual without triggering a taxable event. However, that $14,000 amount applies to each spouse, which means couples can gift $28,000 total to the same individual during the year.

Something else to keep in mind: This $14,000 limit applies to an individual recipient, not a couple. For example, John wants to give money to his son, who is married. John and his spouse can gift a total of $28,000 to their son. They can also gift an additional $28,000 to his son’s spouse, making their total gift to the couple $56,000 without having to pay taxes. It’s important to note that a Form 709 may be required to be filed when money is gifted, even if the donation isn’t a taxable event.

There are a few exceptions to the $14,000 gift limit. Gifts to your spouse are not included in this rule. Additionally, there are specific exclusions where you may be able to go over the $14,000 threshold. For example, if the money is used to pay for someone’s qualifying educational or medical expenses. Donations to a political organization are also excluded for those who want to support a favorite candidate.

How Gifts May Affect an Estate

Another factor to consider before gifting money to a loved one is how it could affect taxes on your estate upon your death.

Most Americans will not be subject to federal estate taxes. For tax year 2017, individuals can leave $5.49 million to beneficiaries without incurring the estate tax. Combined, the threshold for a couple is $10.98 million.

Donors are taxed on any money gifted above $14,000, and the overage is deducted from the donor’s $5.49 million exclusion limit. For example, John gifts his daughter, Pam, $25,000. John pays taxes on $11,000, the difference between the total and the limit of $14,000. Additionally, John now has a $5.38 million exclusion limit.

While these limits are consistent on the federal level, individual states may impose different estate tax limits. A financial professional alongside a qualified attorney and tax professional can help navigate the ins and outs of estate taxes in order to devise a strategy that helps maximize the amount of money that can be passed on to beneficiaries.

Options for Gifting to Minors

Here are three possible ways to make a one-time or recurring gift to individuals who are under the age of 18:

  1. Open a custodial account. The Uniform Transfer to Minors Act (UTMA) or the Uniform Gifts to Minors Act (UGMA) allow for an account to be opened on behalf of a minor. An adult “custodian” must be appointed for this account – someone to act on behalf of the minor until he or she is of age. The custodian can be you, your spouse, the minor’s parent or guardian, or someone you trust.
  1. Fund their education. A 529 plan is a great tool for helping out for college or other post-secondary training. One feature of the 529 plan: while the $14,000 gift limit still applies, five years of contributions can be made at one time with no taxable event. That means you could write a check for $70,000 to a 529 plan at one time – and your spouse could do the same. Distributions are made tax-free, as long as the funds are used for qualified educational purposes.
  1. Consider a Roth IRA. If the minor is working a part-time job, he or she can qualify for a Roth IRA. Keep in mind, however, that you’re limited to contributing only as much as the minor makes in income (up to $5,500). So if your grandchild makes $3,000 during the year, you can contribute $3,000 to the Roth IRA. One added benefit: your grandchild will enjoy tax-free withdrawals later.

If you’re considering making a gift to someone, you should consult with a qualified tax professional who can help you navigate the pros and cons of gifting.


The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice.  Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

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Danielle Christensen


Danielle is dedicated to serving clients to achieve their retirement goals. As a Paraplanner, Danielle helps the advisors with the administrative side of preparing and documenting meetings. She is a graduate of the College of St. Benedict, with a degree in Business Administration and began working with Secured Retirement in May of 2023.

Danielle is a lifelong Minnesotan and currently resides in Farmington with her boyfriend and their senior rescue pittie/American Bulldog mix, Tukka.  In her free time, Danielle enjoys attending concerts and traveling. She is also an avid fan of the Minnesota Wild and loves to be at as many games as possible during the season!