Gift-giving can allow you to reduce your taxable estate and help your beneficiaries before you’re gone. There are several ways to give gifts to family, friends or charitable organizations without getting hit with large tax penalties.
Designating these gifts while you are still alive allows you to carry out your specific wishes, keep your money free of tax burden in many cases, and also avoid leaving assets tied up in probate.
- Gifts—For gifts made in 2026, the federal annual exclusion is $19,000 per recipient per donor for qualifying present-interest gifts. A larger gift may require Form 709 without creating tax payable if the donor has sufficient lifetime exclusion. Gift-splitting and other exceptions can require a return even for gifts within the annual exclusion. See the IRS gift-tax FAQ and Form 709 instructions.
- Medical and educational expenses—The federal gift-tax exclusion for direct tuition payments applies to tuition paid directly to a qualifying educational organization, not books, supplies, room and board, or similar costs. Qualifying medical expenses must be paid directly to the care provider or insurer; insurance-reimbursed amounts do not qualify. These exclusions have no dollar limit when their requirements are met. See the federal educational and medical exclusion rules.
- 529 college savings plans—For a contribution made in 2026, a donor may elect on Form 709 to spread up to $95,000 per beneficiary over five years for federal gift-tax purposes. Two spouses may each use the election, potentially covering $190,000 in total. This uses each donor’s annual exclusions for that beneficiary over the five-year period, so other gifts must be coordinated. Required elections and reporting apply, including separate elections when spouses split gifts. These amounts are not overall 529 contribution limits. If the donor dies during the five-year period, the portion allocated to later years is generally included in the donor’s estate under section 529. See the IRS five-year election rules and 2026 annual exclusion amounts.
- Charitable gift funds—These funds allow you to make a tax-free contribution and then grow your gift before donating it to an organization. Make sure the organization is eligible to receive tax-free gifts.
- Charitable lead and remainder trusts—These trusts let you designate a gift from which your heirs can receive either the principal or the income and the charity, the other.
The more you can do with your estate while you are still around to make decisions and act on them, the fewer decisions your family will have to make later.
Over the past 34 years, the Law Offices of Christopher A. Benson has helped clients with estate planning. Contact our Federal Way office for a free initial consultation to discuss your goals and planning options.
