{"id":183846,"date":"2025-12-14T21:30:10","date_gmt":"2025-12-14T21:30:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/183846\/"},"modified":"2025-12-14T21:30:10","modified_gmt":"2025-12-14T21:30:10","slug":"heres-the-smartest-way-boomers-can-give-kids-tax-free-money","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/183846\/","title":{"rendered":"Here\u2019s the Smartest Way Boomers Can Give Kids Tax-Free Money"},"content":{"rendered":"\n

When it comes to helping your kids financially, most boomers face a tricky question: how do you transfer money without the IRS taking a huge cut<\/a>?<\/p>\n

Read More: How Much You Need To Earn To Be Upper Middle Class in Every State<\/a><\/p>\n

Discover Next: How Middle-Class Earners Are Quietly Becoming Millionaires \u2014 and How You Can, Too<\/a><\/p>\n

I talked with Lance Morgan, financial expert and founder of College Funding Secrets<\/a>, to find out the smartest strategy. His answer centered on a specific dollar amount<\/a> that caught me off guard: $19,000.<\/p>\n

Here\u2019s how it works. In 2025 and 2026, you can give any person up to $19,000 per year without triggering gift tax reporting requirements<\/a>. That\u2019s not $19,000 total \u2014 that\u2019s $19,000 per person, per year. If you\u2019re married, you and your spouse can each give $19,000 to the same person, effectively doubling the amount to $38,000. However, Morgan did caution you to be careful about the source of those funds.<\/p>\n

\u201cThe $19,000 gift is tax-free to the recipient,\u201d he said, \u201cbut if you take the money out of an IRA, you are still going to pay Uncle Sam his portion of the money<\/a>, since he is your partner. However, if you have money that has already been taxed, it is a great way to give your kids, grandkids or anyone else, $19,000 without them needing to pay income tax on that money.\u201d<\/p>\n

Find Out: 20 Best Cities Where You Can Buy a House for Under $100K<\/a><\/p>\n

The annual gift tax exclusion is powerful because it\u2019s per person and resets every calendar year. Let\u2019s say you have two kids and four grandkids. As a married couple, you could gift $228,000 in a single year completely tax-free: $38,000 to each of your two children, $38,000 to each of their spouses and $38,000 to each grandchild.<\/p>\n

The recipients don\u2019t owe any income tax on the money, and you don\u2019t have to file a gift tax return as long as you stay at or under the $19,000 threshold per person.<\/p>\n

Morgan\u2019s bigger point was about where the money comes from. Most boomers have saved for retirement in 401(k) plans or IRAs, and here\u2019s where things get complicated.<\/p>\n

\u201cTransferring wealth from one generation to the next without the IRS inheriting more than your kids is always a challenge,\u201d Morgan said. \u201cMost families have saved for retirement into a company 401(k) plan or other qualified retirement account and the IRS is their biggest partner. Not only does the IRS get a percentage of your retirement income, when you die, your IRA money also gets added to your income in the year of your death, which could put you in the highest tax bracket.\u201d<\/p>\n

The issue is that traditional IRA and 401(k) money has never been taxed. When beneficiaries inherit these accounts, they typically must empty them within 10 years and pay ordinary income tax on every dollar withdrawn. If your kids inherit a large IRA and have to take big distributions, those withdrawals could push them into higher tax brackets, meaning they lose a significant chunk to taxes.<\/p>\n

This is where Morgan\u2019s $19,000 annual gifting strategy shines. If you have money in taxable accounts \u2014 money you\u2019ve already paid taxes on, such as a Roth IRA \u2014 you can give that away tax-free up to the annual exclusion. Your kids get the full amount without owing any income tax.<\/p>\n

\u201cUsing real estate, life insurance and a few other strategies allows you to pass money to the next generation tax-free,\u201d Morgan noted.<\/p>\n

The key is planning ahead. Instead of letting massive retirement accounts pile up<\/a> only to get hammered by taxes when your heirs inherit them, you can strategically gift smaller amounts each year from already-taxed sources.<\/p>\n

Even if you give more than $19,000 to someone in a single year, you probably won\u2019t owe gift tax. That\u2019s because there\u2019s a lifetime exemption of $13.99 million per person in 2025, rising to $15 million in 2026<\/a> for givers filing as single, or $30 million for married couples.<\/p>\n

If you exceed the annual $19,000 limit, you just need to file IRS Form 709<\/a> to report it, and the excess counts against your lifetime exemption. For most families, this means you can transfer significant wealth without ever actually paying gift tax, you\u2019re just using up your exemption.<\/p>\n

Morgan mentioned a few other approaches beyond the annual exclusion:<\/p>\n

You can pay unlimited amounts directly to educational institutions for tuition<\/a> without it counting as a gift at all. Same goes for medical expenses paid directly<\/a> to healthcare providers. These payments don\u2019t reduce your $19,000 annual exclusion or your lifetime exemption.<\/p>\n

Life insurance is another tool Morgan highlighted. When structured properly, life insurance death benefits<\/a> pass to beneficiaries income-tax-free, and can be arranged to avoid estate taxes<\/a> as well.<\/p>\n

The $19,000 annual gift tax exclusion gives boomers a straightforward way to help their kids financially without triggering tax headaches for anyone. The key is using money that\u2019s already been taxed rather than pulling from retirement accounts where the IRS is still waiting for its cut.<\/p>\n

As Morgan said, wealth transfer is all about minimizing what the IRS inherits. By gifting strategically during your lifetime from the right sources, you can ensure more of your money ends up with your family rather than the government.<\/p>\n

More From GOBankingRates<\/p>\n

This article originally appeared on GOBankingRates.com<\/a>: Financial Expert: Here\u2019s the Smartest Way Boomers Can Give Kids Tax-Free Money<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"When it comes to helping your kids financially, most boomers face a tricky question: how do you transfer…\n","protected":false},"author":2,"featured_media":183847,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[138,116397,246,116396,47909,116395,111,139,69,244,245,19422],"class_list":{"0":"post-183846","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-college-funding-secrets","10":"tag-finance","11":"tag-gift-tax","12":"tag-income-tax","13":"tag-lance-morgan","14":"tag-new-zealand","15":"tag-newzealand","16":"tag-nz","17":"tag-personal-finance","18":"tag-personalfinance","19":"tag-retirement-income"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/183846","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=183846"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/183846\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/183847"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=183846"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=183846"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=183846"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}