Originally published March 2015. Last updated March 2026.
Strategic gifting reduces your taxable estate while helping the people and causes you care about. Here are five approaches that benefit both the giver and the receiver.
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1. Annual Gift Exclusion
In 2025, you can give up to $19,000 per person per year without filing a gift tax return or reducing your lifetime exemption. Married couples can give $38,000 per recipient. A couple with four grandchildren could transfer $152,000 per year out of their estate, gift-tax-free.
These gifts also remove future appreciation from your estate. If you give $19,000 in stock that grows to $50,000 over the next decade, that $31,000 of growth is in your grandchild’s hands, not in your taxable estate.
2. Direct Tuition and Medical Payments
Paying tuition or medical bills directly to the institution is unlimited and doesn’t count toward the $19,000 annual exclusion. You can pay a grandchild’s $50,000 college tuition and still give them $19,000 in the same year.
Important: the payment must go directly to the school or medical provider, not to the individual.
3. Front-Loading a 529 College Savings Plan
You can contribute up to five years’ worth of annual exclusion gifts to a 529 plan in a single year: $95,000 per beneficiary ($190,000 for married couples) in 2025. This removes a significant amount from your estate immediately while funding education for the next generation.
If you make the five-year election and die within that period, a prorated portion returns to your estate. But for most people, this is one of the most efficient ways to transfer wealth.
4. Qualified Charitable Distributions
If you’re 70 and a half or older, you can donate up to $105,000/year directly from your IRA to qualified charities. It satisfies your RMD without adding to your taxable income. It reduces your estate, supports causes you believe in, and keeps your tax bill lower.
5. Charitable Remainder Trusts
A CRT provides you with income during your lifetime (or a set term of years), with the remainder going to charity when the trust terminates. You receive a partial income tax deduction when you fund the trust, and the assets are removed from your estate.
This is particularly powerful with highly appreciated assets. Contributing stock with large unrealized gains to a CRT avoids capital gains tax and converts a concentrated position into diversified income.
FAQ
What’s the lifetime gift tax exemption?
$13.99 million per person in 2025 ($27.98 million for married couples). This is the total amount you can give away during your lifetime and at death before federal estate/gift tax applies. It’s scheduled to drop to roughly $7 million per person in 2026.
Does giving money away reduce my estate tax?
Yes. Every dollar you give away (within the annual exclusion or directly for tuition/medical) is no longer in your taxable estate. For estates near the exemption threshold, strategic gifting can save your heirs significant estate tax.
Schedule a free 20-minute consultation to build a gifting strategy that works for your estate plan.
R.L. Brown Wealth Management
106 W Vine St, Suite 300, Lexington, KY 40507
859.317.5889
