Q:  My wife and I would like to gift some substantial assets to our children, but the rules seem confusing.

A:  The rules are indeed confusing, but the first things to consider is that the tax people don’t care about certain gifts at all. You may gift between spouses, to a charity, to a medical institution, or to an educational establishment without limit. Children are a different matter as they don’t fit any of these categories.

The U.S. government currently “allows” an individual to leave almost $13 million to anyone not mentioned above, including children. The IRS also allows two spouses to combine this “lifetime” exclusion, such that a couple can ultimately leave over $25 million to heirs without estate tax.  This amount drops by roughly half after 2025 under current law.

In 2024, you and your spouse may each gift up to $18,000 to any individual as an “annual exclusion” without affecting your lifetime gifting allowance. So each of your children could receive $36,000 from you two in every calendar year with no consequences. If you did this, your accountant would notify the IRS that you each gave the allowed annual amount. If you gift more than this in a given year, you would file a gift tax return that would keep track of your excess gift.

For example, if you and your spouse gave a child $136,000 in 2024, you’d file a gift tax return that documented an excess gift of $100,000 dollars. This amount would then be subtracted from your lifetime gift allowance at your death.  If your taxable estate was under the lifetime limits (remember almost $26 million for a couple; half that for individuals in 2024), then in most cases a prior “excess gift” has no consequences.

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Note that the recipient of a gift has no documentation responsibility and no tax obligations.  Note also that you can exclude payments to a school or medical institution for your children (and others) without that counting towards either the annual or lifetime exclusion amounts.

There are some creative ways to help children with gifts. We work with some families that have provided funds for a home mortgage for children. Although the parents must report the interest due them on the mortgage, they can forgive the annual exclusion amount (or exceed it with gift tax documentation) as they wish. We work with grandparents who pay some or all of grandchildren tuition bills (remember that this is not considered as a limitation to their ability to gift the usual annual exclusion amount).

For families that may have a taxable estate (in 2026 meaning that all assets combined might exceed around $12 million), there are many more sophisticated methods of aggressive gifting that attempt to reduce the value of the estate in a tax efficient manner. This is best discussed with your financial planner and tax attorney.

A final thought is aimed at those parents who are not wealthy enough to give substantial recurrent gifts to children.  We encourage parents to “put themselves first.” They should be confident of having enough funds to guarantee a safe and secure retirement at a desired lifestyle before impairing their future with overly generous gifts.

This article originally appeared on Florida Today: Parents should put themselves first when giving kids large assets