If you have children and you've been thinking, "Why wait until I'm gone to help them financially?"—this episode is for you. In Episode 294, I walk through the biggest things to consider before making gifts to your kids while you're still alive, and I break down some of the smartest ways to do it without triggering unnecessary taxes.

I'm seeing this trend more and more with my clients, and it makes sense. Financial markets have performed well, real estate has surged, and many retirees are in a stronger position than generations before them. But just because you can gift money doesn't mean you automatically should. There are several financial and family dynamics you need to think through first.

The First Question I Ask: Can You Truly Afford It?

Before you gift a dime to your children, I want you to look at your own financial foundation. I work with clients in their late 50s all the way into their 80s, and one of the most important realities is this: your retirement plan has to work first.

You may have raised your kids, supported them, paid for education, and helped them get launched. Ideally, they should be able to support themselves. If you're gifting because you're financially secure and you want to, that's completely fine. But if the gift creates risk for your long-term success, it's not worth it.

I also want you to think about long-term care. Many people don't have long-term care insurance because it's expensive, or they had it and dropped it when premiums increased. That means they're planning to self-insure. If you give away too many assets now, what does that do to your ability to fund care later?

 

You'll Want to Hear This Episode If You're Interested In…

• [02:12] The #1 financial checkpoint before gifting anything

• [03:18] Long-term care planning, and why gifting can backfire

• [04:02] Common gifting goals: housing, school, debt, lifestyle support

• [05:12] Why business funding gifts require extra caution

• [06:26] The "fairness problem" when you have more than one child

• [07:22] How gifts can unintentionally destroy motivation and independence

• [08:10] The 2026 gift tax limits ($19,000 per person, $38,000 per couple)

• [09:04] The lifetime exemption, and why Congress can change the rules

• [10:28] The hidden danger of gifting appreciated assets

• [11:07] Step-up in basis vs. gifting while alive

• [12:05] Medicare premium impacts and capital gains planning

• [13:14] The tax-efficient order of assets to gift

• [15:22] Gifting real estate, and the cost basis trap

• [17:12] The 2-out-of-5-year home sale exclusion rule

• [18:05] The five-year Medicaid lookback and trust planning considerations
   

What's the Gift Actually For—and Is It One-Time or Ongoing?

One of the most important planning steps is clarifying why you're giving the money.

The most common reason I see right now is housing. Real estate prices have climbed dramatically, and higher interest rates make monthly payments tougher. Helping a child with a down payment can make homeownership realistic.

Other common reasons include paying for schooling, helping pay off student loans or credit card debt, or supporting a child during illness or unemployment. Some parents also want to help grandchildren with camps, daycare, or private school.

I also talk about gifting money for a business startup—but this is where I urge caution. Businesses fail all the time. If you're going to do it, I believe a business plan and a real strategy matter.

Taxes, Cost Basis, and the Biggest Mistake People Make

Many people assume gifting is simple. It isn't.

In 2026, you can gift $19,000 per person per year without triggering reporting. Married couples can gift $38,000 per child annually. Above that, you may need to file a gift tax return, and the excess counts toward your lifetime exemption.

Right now, that lifetime exemption is around $15 million, but I've been a financial advisor since 2001 and I've seen it change dramatically. When I started, it was only $600,000. Congress can change the rules again.

And here's the big one: if you gift appreciated assets while alive, your child inherits your cost basis. If they sell, they may owe a large capital gains tax. But if they inherit through death, they get a step-up in basis. That one detail can mean tens of thousands of dollars in taxes.

 

Resources Mentioned

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