Sharing the Wealth: Family Gifting Strategies

The ability to equip your family with long-term financial success is arguably one of the greatest gifts of all. To help ensure your family’s financial future, you can take advantage of philanthropic strategies and invest in trusts, donor advised funds, and 529 savings plans.

Discover how these financial tools can help you secure your family’s financial future and create a philanthropic legacy. Estate and gift thresholds are scheduled to decrease at the end of 2025. Consider taking advantage of the current higher amounts for upcoming birthdays or holidays, as gifting may also reduce your estate taxes. Presently, you are able to give or gift up to $18,000 per recipient in tax-free gifts without having to file any paperwork or pay any taxes. Gifts above that figure would be subject to taxes.

Irrevocable trusts, including Charitable Remainder Trusts and Charitable Lead Trusts, are useful tools for managing assets and distributing funds amongst your family members. These trusts are also excellent philanthropic vehicles, and can be helpful when gifting to your children, as they allow for greater donor control over assets.

• To operate a Charitable Remainder Trust, develop a plan to contribute assets and establish how frequently your beneficiaries will receive fixed and variable income. The balance will be transferred (or remain) to your selected charity or charities.
• The Charitable Lead Trust works in the opposite manner, providing regular cash flow to a chosen charity or charities for a set period. Once the set period ends, the remaining assets are distributed to your designated beneficiaries.

Donor Advised Funds (DAF) are a tool that have rapidly grown over the last 20 years and are the fastest growing vehicle in philanthropy. The process to set up a DAF is simple and involves a fiscal sponsor who manages the funds and legal aspects. Once the fund is established, the donor may receive a tax deduction on the assets that have been contributed when you file your taxes. The donor can also recommend how the assets are invested and when to grant proceeds to the charity or charities listed as part of the DAF.

DAFs offer flexibility with no mandatory distribution timeframe, meaning funds can remain in the account for the life of the donor.  Compared to traditional foundations, DAFs are extremely cost effective and accessible to families of varying income levels.

A great way to share wealth with your children or grandchildren is through a 529 savings account. A 529 savings account allows you and your spouse to contribute 5 years' worth of annual exclusion gifts upfront for educational expenses without affecting your lifetime federal gift tax exclusion. Accelerated gifting allows a contributor to combine five years of gifting for up to $90,000 for an individual contributor, or $180,000 for couples filing jointly in a single year, as long as no additional gifts are made until five years have passed. There are also numerous estate planning benefits associated with 529 savings plans.

Individuals over the age of 70½ can make QCDs from their IRAs to a qualified charity, potentially avoiding income tax on the distributed amount. QCDs may also help satisfy your annual required distribution as long as certain rules are met. As always, please speak with a tax advisor to see which of the mentioned strategies may apply to you.

By embracing family gifting strategies, you can ensure your family is set up for success while establishing a philanthropic legacy and potentially utilizing tax deductions. If you wish to involve family members in charitable giving and establish a philanthropic legacy, consider these methods to share the wealth before 2026.