Many families we work with reach a pivotal point: “We’ve built meaningful wealth, our retirement is secure, and given how expensive almost everything feels, especially homes, you begin asking, “How can I help my children and grandchildren today—without jeopardizing our future or ‘spoiling’ them?”
Gifting during your lifetime can be incredibly impactful. It allows you to see the benefits, guide decision-making, and instill values while you’re still here. However, thoughtful planning is critical—particularly when balancing generosity with appropriate guardrails and managing expectations.
Annual Gifting
The simplest strategy is often the most overlooked.
Each individual can gift up to the annual exclusion amount ($19,000 per recipient in 2026, indexed for inflation) without using lifetime exemption or filing a gift tax return. Married couples can combine gifts, effectively doubling this amount per beneficiary.
How the funds could be directed:
- Into a child’s or grandchild’s taxable brokerage account to be invested
- Using a portion of the funds to fund Roth IRAs so long as the beneficiary has earned income [2026 Annual Limit: $7,500]
- With intention of going towards a major purchase such as a home or vehicle
Guardrail consideration: Outright gifts offer no control. For younger recipients or larger gifts, pairing annual gifts with structured accounts can help you convey your intentions.
529 Plans
For families prioritizing education, 529 plans remain a great planning option to consider.
Key benefits:
- Tax-free growth when used for qualified education expenses
- Potential state tax deductions (including many states such as Minnesota)
- Ability to “superfund” (5 years of annual gifts at once, which can reduce one’s estate)
Recent rule changes have also expanded flexibility:
- Up to $35,000 can be rolled into a Roth IRA for the beneficiary (subject to certain conditions)
- Broader use for K–12 education and vocational programs
Guardrail consideration: Funds are restricted to education-related uses (or subject to penalty). For families unsure about education needs, overfunding should be avoided.
Trump Accounts
A newer addition to the planning landscape is the Trump Account, created under recent federal legislation as a retirement-focused savings vehicle for children.
While still being implemented, the current structure is important to understand:
Key features:
- Available for children under age 18
- Funded regardless of earned income [Annual limit: $5,000 per child]
- Includes a one-time government seed contribution for eligible children of $1,000 (2025–2028 births)
- Converts to a traditional IRA–style account at age 18
- Unlike a Roth IRA, Trump Accounts grow tax-deferred, meaning distributions in adulthood are taxed as ordinary income.
The real opportunity might not lie in the account itself—but in what happens after age 18.
Once the account transitions into a traditional IRA structure, it becomes eligible for Roth conversions, which allow assets to be moved into a Roth IRA by paying tax on the converted amount. This can create a solid planning strategy: Fund early → grow tax-deferred → convert strategically during low-income years → create tax-free retirement assets.
Guardrail consideration: While Trump Accounts offer a compelling way to start retirement savings early, families should be mindful that assets transfer fully to the child at age 18, and thoughtful tax planning is required to execute Roth conversions efficiently while maintaining discipline around long-term use.
Trust Planning:
For larger estates or more complex family dynamics, trusts can provide a high level of flexibility and control.
Common structures include:
- Revocable trusts: Maintain control while alive; help with estate organization
- Irrevocable gifting trusts: Remove assets from your estate while setting rules around use
- Incentive trusts: Tie distributions to milestones (education, employment, etc.)
Why families use trusts:
- Protect assets from misuse or outside risks
- Customize distribution timing and purpose
- Create multi-generational legacy structures
- Incorporate spendthrift provisions, which can help shield assets from creditors, divorce, or imprudent spending by limiting how and when beneficiaries can access funds
Guardrail consideration: Trusts require legal setup and ongoing administration, but for many families, the control and protection far outweigh the complexity.
Kiddie Tax Considerations
When gifting assets to children or grandchildren, particularly through brokerage or custodial accounts, it’s important to understand the potential impact of the kiddie tax.
The kiddie tax applies to unearned income such as interest, dividends, and capital gains. While a portion may be taxed at the child’s rate, income above certain thresholds is taxed at the parent’s marginal rate.
Why this matters:
- Can reduce the tax efficiency of shifting income to children
- Most relevant for larger custodial or brokerage accounts
Planning considerations:
- Be mindful of income-producing assets in a child’s name
- Coordinate with overall family tax planning
Guardrail consideration: Improper planning can reduce tax benefits and create unintended consequences.
Final Thoughts
Gifting during your lifetime can be one of the most rewarding aspects of financial success—but it deserves the same level of planning that helped you build your wealth in the first place.
If you’re considering how to help children or grandchildren, we encourage you to evaluate not just how much to give, but how and when to give it.
Intentional planning today can create both opportunity and accountability for generations to come. We encourage you to reach out to us to discuss the various ways you can impact your family members.
Contribution limits and tax rules discussed are based on current law and may be adjusted by future legislation or IRS guidance. This material is provided for informational and educational purposes only and should not be construed as investment, legal, or tax advice. Individuals should consult with their tax, legal, and financial professionals before implementing any strategy discussed herein.