For those fortunate enough to have saved and invested well, a time may come where you may want to give some of your accumulated wealth to others.  There are many ways to gift assets, and if done correctly can have a very positive outcome.  The normal gifting limit, without incurring taxes is $14,000 per year, per person, or $28,000 per year for a couple.  You may want to give money directly, but there are other creative ways outlined below: 

    • College Savings: A 529 college savings plan has the same gifting limits described above, but these accounts can also accept five years worth of contributions all at once, as long as you don’t gift more into the account for another five years. Gifting in this way certainly helps the recipient with college expenses, but it can also provide options by allowing for a semester abroad or making an Ivy League or top technical school obtainable.  Helping fund a college plan also shows that you care about higher education, and may encourage the student to attend school and be successful.


    • Roth IRA: Starting a retirement account when young is one of the best things to help build a secure financial future.  A Roth IRA grows without taxes, so it may accumulate more then a regular non-retirement account.  Additionally, the distributions once age 59 ½ are tax free.  If contributions are started when someone is very young, the compound interest that accrues over many decades can be enormous.  If you are considering opening a Roth for someone who is a minor just know that you or some other adult will have to also be listed on the account as a custodian.  When starting adult life there may be many new expenses and often starting salaries do not allow for a lot of extras such as saving for retirement.  In this case, the gift of a Roth can be very timely.


    • Paying off college debt: Going to school can be very costly and many people have to take out loans to pay their tuition.  The standard loan repayment plan is only 10 years so monthly payments can be significant even with modest balances.  A student loan of $60,000 would have a monthly payment just above $700 which is prohibitive for many young adults.  Consider paying the monthly college loan payments or just paying off some or all of the balance if you can afford it.  Another technique is to pay the college tuition while the student is in school, the benefit is there is no gifting limit as long as the school is paid directly.


    • Health related costs: For those unfortunate times when a health problem occurs, insurance does not always pay for everything.  Routine checkups, and the annual cold are typically covered by insurance but major health events often leave a number of debts.  In fact, health related debts are one of the most common reasons for bankruptcy.  Paying off someone's medical debt can obviously ease their financial burdens which could allow them to have a clear mind so they can focus on their recovery.  For those that do not live in a large metropolitan area, advanced medical treatments might be a long distance away. Airfare and extended hotel stays could add up and be an expensive out of pocket experience.  Offering to pay someone's travel related costs just might open up better treatments for them which can alter their future in a positive way.  There is no gifting limit when paying medical related costs, even if it is items such as IVF or braces.


  • Life Insurance: Younger people will often forego getting the proper life insurance even if they are married and have a family.  The reasons can be as simple as affordability, but other times it can be chalked up to not having enough life experience yet to know that we are all mortals. Buying them life insurance is something that protects everyone, including you if they are a close family member.  If done correctly, you could even set up the insurance so it is paid in full and it never becomes a financial burden for the recipient. 

These are only a few ways in which you can gift assets.  There are many other techniques including advanced strategies using trusts and other estate planning tools.  Think about what would make you feel good and what might be helpful for the recipient.  Working through all the options with a financial planner and learning how others have succeeded in creating gifts will be time well spent.

Go to top