Preparing for the Holidays: Financial Planning Tips for Gifting and Charitable Giving
The holidays bring joy, traditions, and a clear desire to help the people and causes you love. If you are supporting aging parents and guiding adult children or grandchildren, a thoughtful plan for gifting and charitable giving can reduce taxes, simplify your estate, and multiply your impact. Here is how to approach year-end generosity with clarity and confidence.
Start With Your Why, Then Set a Budget
Before you look at IRS rules, get grounded in your goals. Ask yourself:
· What do you want your gifts to accomplish for family this year and over time?
· Which charities align with your values, and how much impact do you want to create now versus later?
· What is the right balance between giving and preserving your retirement security?
Decide on a total giving budget, then split it between family gifts and charitable donations. This simple step helps prevent reactive decisions and keeps your long-term plan on course.
IRS Rules for Gifting Money to Family Members
You can give money to anyone during the year without triggering immediate income tax. Gifts are not income to the recipient. The rules you need to know relate to the federal gift and estate tax system, which tracks large gifts over your lifetime.
· Annual exclusion: You can give up to a set amount per recipient each calendar year without using any of your lifetime exemption. For 2025 that amount is $19,000 per recipient.
· Lifetime exemption: Gifts above the annual exclusion reduce your lifetime gift and estate tax exemption. The exemption is historically high right now and is not expected to drop over the next few years. Large gifts may still be prudent in some cases, but they require careful planning.
· Spousal double gifting: Married couples can double the $19,000 per recipient by each of them making their own $19,000 gift. This effectively doubles the annual exclusion without the need to elect gift splitting on a gift tax return (as long as you stay at or below the exclusion amount).
· Direct payments for education or medical costs: Payments made directly to a school for tuition, or directly to a medical provider for qualified expenses, do not count against the annual exclusion. This is a powerful way to help family while preserving your gifting capacity.
If you exceed the annual exclusion to any individual, you typically file IRS Form 709 for that year. Filing does not mean you owe tax in most cases. It documents the use of your lifetime exemption ($13.99M per person in 2025 – no taxes are due until your gifts or estate have given away more than this amount).
How Much Money Can You Gift to a Family Member?
Practically speaking, you can give any amount. The key is how much you can give without filing a gift tax return and without affecting your lifetime exemption. Use these guidelines:
· Up to the annual exclusion per recipient: No gift tax return required.
· Above the annual exclusion: Gift tax return required, and the excess reduces your lifetime exemption.
· Direct tuition or medical payments: Unlimited if paid to the provider, and these do not reduce your annual exclusion.
Example: You and your spouse want to help a child purchase a home. You could each give the child $19,000, and each give the child’s spouse $19,000, for a total of $76,000 in 2025 without using your lifetime exemption. If you give more, you document the excess on Form 709.
For a deeper dive on family transfers, see our detailed guide to the rules for gifting money to relatives.
Smart Ways to Structure Family Gifts
Thoughtful structure can protect family relationships and keep your plan tax efficient.
· Pair cash gifts with education: If you are supporting grandkids, consider funding 529 plans. You can “superfund” by contributing up to five years of annual exclusion gifts at once, then elect the five-year spread on Form 709.
· Help with housing wisely: If assisting with a down payment, clarify whether funds are a gift or a loan. If a loan, document it with a written note and at least the IRS Applicable Federal Rate to avoid imputed interest rules.
· Keep control where needed: For larger transfers, a trust can protect assets from divorce, creditors, or poor financial decisions. Trusts can also coordinate multi-year support.
· Coordinate with your estate plan: Update beneficiary designations and your will or trust to reflect lifetime gifts so inheritances stay balanced.
Charitable Giving: Strategies That Maximize Impact
Holiday giving is a perfect time to align generosity and tax planning.
· Qualified charitable distributions (QCDs): If you are 70½ or older and have an IRA, you can give up to $108,000 (2025) per year directly from your IRA to qualified charities. The distribution is excluded from your income, which can lower Medicare premiums and reduce the taxation of Social Security. QCDs can also count toward required minimum distributions once those have begun.
· Donate appreciated investments: Giving long-term (held more than one year) appreciated stock or mutual funds directly to a charity can eliminate capital gains and give you a deduction if you itemize.
· Donor-advised funds: If you want a deduction this year but the time to choose charities later, consider a donor-advised fund. You can bunch several years of giving into one tax year to exceed the standard deduction, then grant to charities over time.
· Give from the right account: If you are in a high tax bracket today, consider giving from taxable accounts with appreciated assets. If you expect higher future tax rates, you might prioritize Roth assets for heirs and use taxable or pre-tax dollars for current giving.
Common Pitfalls to Avoid
· Missing the calendar-year deadline: Gifts must clear by December 31 to count this year. Allow extra time for transfers, stock gifts, or DAF contributions.
· Forgetting about state considerations: Some states have different estate or inheritance rules. Coordinate your plan across jurisdictions.
· Triggering unintended taxes: Large gifts of appreciated property can pass along your cost basis. Make sure recipients understand potential capital gains if they sell.
· Failing to document: Keep records for gifts, notes for family loans, and confirmations for charitable donations.
Caring for Aging Parents While Managing Your Plan
If you are acting as or considering a power of attorney for a parent, confirm gifting authority in the document before making gifts from their accounts. Align any parental gifts with their documented wishes, care needs, and tax plan. When in doubt, consult the estate attorney who drafted the documents.
You can also coordinate family gifts with broader goals like education funding, long-term care planning, and preserving generational wealth. A cohesive plan keeps giving sustainable and fair.
When to Get Professional Help
Complex family dynamics, large gifts, and charitable strategies that involve IRAs or trusts benefit from a coordinated approach. A fiduciary planner can help you:
· Map gifts to a multi-year tax plan
· Choose the right accounts for giving and for legacy
· Align your estate documents with your gifting strategy
If you want a structured review of your wealth, taxes, and legacy goals, explore our wealth planning services. For tax-aware retirement moves that complement year-end giving, you might also consider whether an IRA Roth conversion fits your broader strategy.
Summary: Give With Purpose, Keep Your Plan on Track
Holiday generosity can bring your family closer and fuel the causes you care about. The key steps are simple. Set a giving budget, understand the annual exclusion and lifetime exemption, use direct tuition or medical payments where helpful, and choose charitable strategies that maximize tax benefits. Document carefully and coordinate gifts with your estate plan so your giving supports both today’s needs and tomorrow’s legacy. When questions arise, a fiduciary partner can help you design a plan that is generous, tax smart, and easy to maintain year after year.
