Giving while you’re living: 3 frequently asked questions about gifting

By Justin Champlain

Fall is in the air, which means it’s pumpkin spice season here in New England! But nipping on the heels of fall, we will soon be into the season of giving and questions start to prop up around gifting and retirement planning.

If you’ve been fortunate enough to accumulate $2 million, $5 million, $10 million or more, retirement planning eventually becomes about more than simply making sure you have enough money to live comfortably. For many successful retirees, the conversation eventually shifts to, what happens to the money I don’t need?

That can lead to questions about minimizing future taxes, reducing the size of a taxable estate and perhaps even gifting to children, grandchildren or charitable organizations while you’re still around to see the impact.

Understanding and navigating the federal gifting rules might seem overwhelming and confusing but here are 3 frequently asked questions that help explain the basics of estate planning:

1. How much can I give?

Technically, you can give away as much money as you want. The more important question is; how much can I give without using any of my lifetime gift and estate tax exemption or generally having to file a federal gift tax return?

For 2026, an individual can give $19,000 per year to any one person without that gift counting against the lifetime gift and estate tax exemption. A married couple can give $38,000 per recipient. That can add up quickly.

For example, a married couple who has an adult child that is also married could give $38,000 to their child and $38,000 to their son/daughter in-law or $76,000 in total. If there are grandchildren involved that’s $38,000 to each of the grandchildren coming from the married grandparent couple as well.

Another important and often overlooked planning tip is a special strategy for 529 college savings accounts. Under the five-year election, an individual can contribute up to $95,000 per beneficiary in 2026, effectively front-loading five years of annual exclusions. A married couple could potentially contribute $190,000 per beneficiary. This strategy has specific rules and reporting requirements, so please coordinate with a tax professional.

2. Will I owe taxes when I make a gift?

Usually, simply giving someone cash or other assets does not create an income tax or capital gains tax for the person making the gift. However, where the money comes from matters. If you sell appreciated investments to generate the cash, you could create capital gains. Likewise, taking money from an IRA or 401(k) could create taxable income and potentially affect Medicare premiums or other tax calculations like net investment income tax.

Separate to income and capital gains tax, however, there should also be consideration for federal estate and gift tax. For 2026, the federal basic exclusion amount is $15 million per individual, or $30 million for a married couple.

This basically means you would have to have reportable gifts above and beyond the annual gift exclusion amount (again, currently $19,000 per person) that totaled $15 million ($30 million if married). Note, certain states have their own estate tax, and others do not. Massachusetts, for example, does have an estate tax, but our neighbors to the north in New Hampshire do not.

3. Will the person receiving the gift owe taxes?

Generally, no. Receiving a gift does not typically create income tax for the recipient.
What happens next is a different question. If your child receives a gift and puts it into a brokerage account, future interest, dividends and capital gains could be taxable. And if you gift appreciated investments rather than cash, the recipient may receive the donor's tax basis, which can have important future tax consequences as well.

In other words, the gift itself generally isn't taxable income, but what happens to the gifted assets afterward can create tax consequences.

The Bigger Picture

If you already know that a portion of your assets will ultimately go to your children or grandchildren, there can be meaningful advantages to giving some of that wealth during your lifetime. You may be able to reduce the size of your future estate, potentially reduce estate taxes and perhaps most importantly, experience the benefit of seeing your loved ones use the money.

There is something pretty special about helping a child purchase their first home, paying for a grandchild's education, supporting a family member through a challenging period or simply creating an experience together and actually being there to see it happen.

Happy planning!

Justin is a Certified Financial Planner CFP® and Enrolled Agent (EA) and is the owner and financial planner of Champlain Financial Planning. Justin lives in Merrimac, Massachusetts, with his wife, son, dog, and horses.