In many cases, people delay giving financial gifts to their children or loved ones until after they die — through their wills or trusts. But what if waiting doesn’t make sense?
It’s all about giving while you’re alive. Rather than hoarding assets until later in life, it involves giving money, property, or support now, while you’re still alive.
In addition to generosity, this can offer powerful financial, emotional, and even tax benefits. Here are a few ways to create a win-win situation for you and your heirs when you give early.
1. See the Impact of Your Wealth in Real Time
The most obvious benefit? You get to watch your loved ones benefit.
Whether it’s providing a grandchild with a debt-free education, helping your daughter buy her first home, or financing a small business dream, giving during your lifetime offers emotional rewards that no inheritance can offer. To put it another way, giving while living transforms legacy into experience.
More importantly, rather than just viewing you as a name on a document, they’ll remember you for what you did for them when they needed it most.
2. Reduce the Size of Your Taxable Estate
If you’re a high-net-worth individual, giving early can reduce your tax bill.
As of 2025, individuals will be able to transfer assets worth up to $13.99 million without paying federal estate or gift taxes. For married couples, the maximum exemption amount is $27.98 million.
It’s important to note, however, that under the Tax Cuts and Jobs Act of 2017, this historically high exemption was scheduled to revert to a lower amount, perhaps around $7 million per individual, beginning in 2026. Also, it’s expected that under the recently passed “One Big Beautiful Bill Act” (OBBBA), the lifetime estate and gift tax exemption will be increased to $15 million by January 1, 2026.
Additionally, estates exceeding the exemption threshold are subject to a 40% federal estate tax rate.
Basically, by giving money away now, you reduce your estate’s value and may avoid paying hefty estate taxes down the road.
Bonus: You also won’t have to worry about managing and distributing an estate later on.
3. Take Advantage of Annual Gift Tax Exclusions
A lifetime exemption, plus tax-free gifts up to $19,000 per recipient per year, will not count against individuals’ lifetime exemptions in 2025. For married couples splitting gifts, this amounts to $38,000.
By doing so for at least a decade, you will be able to move substantial wealth out of your estate legally and efficiently.
Suppose a couple has two children and four grandchildren, and they will be able to give $216,000 per year tax-free.
4. Help When It Matters Most (Not When It’s Too Late)
Let’s be brutally honest. 30-year-olds who are struggling to save for a mortgage or pay for childcare probably need your help more than 55-year-olds who already have a job, a mortgage, and savings. Case in point, only 33% of 30-year-olds own a home in the U.S. today, down from 47% in 1984, as the average age of first-time buyers increases.
Giving early, however, helps your heirs when they need it most. Among the possibilities are;
- Relieve student debt.
- Prevent predatory borrowing.
- Support career transitions.
- Help build equity early in life.
The result? Rather than just providing a safety net, this creates a cycle of wealth.
5. Teach Financial Stewardship Through Guided Support
By giving while living, you can also teach your heirs how to manage wealth. According to studies, 70% of family assets are lost between generations, and 90% of them disappear by the third generation.
Instead, support should be provided gradually, along with lessons and guidance. This can be accomplished by promoting financial literacy, such as;
- Encourage saving and investing.
- Set expectations, like matching their contributions.
- Teach budgeting and long-term thinking.
This is more than just a gift — it’s mentorship.
6. Support Strategic Wealth Transfers
When it comes to giving, it’s not just about handing over cash. Giving strategically can include the following;
- Investing in a 529 plan for your grandchild’s education. With a 529 plan, contributions grow tax-deferred. At the same time, withdrawals are tax-free if used for qualified education expenses, such as tuition, fees, books, room and board, and supplies for college, vocational school, apprenticeship programs, or even K-12. In addition, contributions to a 529 plan are considered complete gifts to beneficiaries, so your estate will not have to pay estate taxes on them.
- Contributing to a Roth IRA for a working child (if they have earned income). By doing so, they can build tax-free savings for retirement early and gain valuable financial planning skills at the same time. With a Roth IRA, you can support their future while taking advantage of current tax benefits.
- Helping with a down payment builds long-term equity. Helping with a down payment can be a transformative gift, enabling a loved one to invest in property and build wealth over time. You’re not only providing financial assistance, but also helping them build stability and security.
In addition to increasing spending power, these moves also offer financial growth.
7. Create Tax Savings for the Recipient, Too
Giving early can not only benefit you, but it can also benefit the recipient financially. Examples include;
- You can pay a child’s medical bills or tuition directly to the provider without counting it against your annual gift limit.
- You can save your heirs thousands by preventing them from accruing high-interest debt.
- If you transfer assets with appreciation potential (like stock), future gains are taxed in your heir’s bracket, which might be lower than yours.
8. Avoid Family Conflicts and Legal Battles Later
After someone’s death, inheriting money can cause stress, miscommunication, and even litigation among family members. By giving while you are alive, you can avoid a lot of headaches.
- If you want to explain your choices openly, you can do so.
- Plans can be adjusted in real time.
- Family members can be treated fairly and visibly.
Overall, it’s better to be clear today than to be confused tomorrow.
9. Retain Control by Giving Strategically
When you give, you don’t give up control. It’s possible to structure gifts in a way that suits your goals and the needs of your heirs;
- Conditional gifts. Among these are educational expenses, home purchases, and business startup costs.
- Gifts into trusts. In addition to providing structure, this can protect assets as well.
- Scheduled giving. An annual contribution is a fixed amount.
As a result, you can share your wealth without compromising your financial security.
10. Enjoy a More Purpose-Driven Retirement
Helping others is a meaningful activity for many retirees. The act of giving while living creates a sense of purpose and connection. Rather than accumulating more, it focuses on utilizing what you already have.
With your money, you can support family, fund causes you care about, or simply make someone’s path a little easier.
Is It Time to Rethink Your Legacy?
Perhaps it’s time to reframe your view of giving as a final act. When it comes to giving while living, it isn’t all about giving away everything you own. It’s more about sharing what you can while it still counts the most.
Consider starting small if necessary. Consult your financial advisor, tax planner, and family members. Develop a long-term plan that includes thoughtful, phased giving. It’s a win-win situation for you — and your heirs.
Quick Tips for Smart Lifetime Giving
- Use the annual exclusion. Currently, this is $19,000 per person per year or $38,000 per couple.
- Pay tuition and medical expenses directly to providers for unlimited tax-free giving.
- Use 529 plans and Roth IRAs to support long-term financial growth.
- Gifts are appreciated as assets, not just cash.
- Set up a living trust or a conditional giving structure if needed.
- Document your gifts clearly to avoid confusion or legal issues later.
Final Thought: You Don’t Have to Wait to Make a Difference
It’s possible to solve a problem, create an opportunity, or create a stronger relationship with every dollar you give today. Unlike inheritances, living gifts allow you to share in the joy of giving.
So, go ahead and give wisely, early, and while living.
FAQs
Will I still have enough money for my own retirement if I give now?
That’s the most important question to ask and to plan for. You should never compromise your financial security by giving while living. Using a financial advisor, run scenarios that account for healthcare costs, longevity, inflation, and lifestyle requirements. Over time, you can add up modest annual gifts without putting your future at risk.
Do I need to pay taxes on money I give to my children or grandchildren?
In most cases, no, as long as the amount stays below the annual gift tax exclusion ($19,000 per recipient or $38,000 for married couples in 2025). If you give more, it may count against your lifetime estate and gift tax exemption. Before making large gifts, you should consult with your tax advisor.
What’s the difference between giving cash and giving assets (like stocks)?
It can be more tax-efficient to give appreciated assets, such as stocks, real estate, or a business interest, rather than giving cash. By doing this, future growth may occur in the recipient’s tax bracket, potentially avoiding capital gains taxes for you. However, gifting appreciated assets requires more planning and paperwork, so it is best to seek the assistance of a professional.
Can I pay for a loved one’s education or medical bills without it counting as a gift?
Yes!
The IRS allows you to pay tuition or qualified medical expenses directly to a provider or institution without it counting toward your annual gift exclusion. It’s a great way to give more tax-free while making a meaningful contribution.
What if I want to give, but I’m concerned about how my heirs will use the money?
This is a valid concern. There are several options available:
- Instead of giving all at once, give gradually
- Making use of conditional gifts (e.g., for education or home purchases)
- Assigning specific rules and safeguards to a trust
- Communicating values, goals, and expectations openly
Rather than just giving, you can guide while you live.
Image Credit: RDNE Stock project; Pexels
