Avoiding Tax Issues When Gifting to Grandchildren

 Posted on December 30, 2024 in Estate Planning

Tis the season for gift-giving, and what better way to celebrate than by gifting to grandchildren — one of life’s greatest joys. Indeed, as your family grows, you may wish to provide a substantial gift to one or more of your grandchildren, perhaps as a way to share your wealth and help them on their future path. However, you may be understandably concerned about the tax implications of larger financial gifts. A Texas estate planning attorney can offer legal strategies to avoid or minimize tax issues when gifting to grandchildren. 

How Can You Minimize or Avoid Taxes on Gifts?

Give the Gift Outright

The Internal Revenue Service allows you to give a gift of up to $18,000 per individual or $36,000 per couple in 2024, per beneficiary. This means that if you have four adorable grandchildren, you could give each one $18,000 tax-free this year alone. You could spread out gift-giving over the years by sticking to the annual limit. Keep in mind that there is also a lifetime gift tax exclusion of $13.61 million per person in 2024, so your total lifetime gifts should not exceed this amount if you wish to avoid tax liability. As for Texas, the state does not have a gift tax, so there is no need to worry about incurring taxes here. 

Set Up a Trust

Setting up a trust is a great way to provide a large financial gift to your grandchildren while minimizing or avoiding taxes. There are different types of trusts that you can consider based on your goals, such as a generation-skipping trust, irrevocable life insurance trust, or grantor trust. An additional benefit of a trust is that you can specify how the beneficiaries may or may not use the trust funds.  

Give the Gift of Education 

A 529 educational account is a tax-advantaged savings account for educational expenses including K-12, college, and apprenticeships. Any gifts deposited into a 529 account grow tax-free, and any money used towards qualified educational expenses also grows tax-free. A 529 account has the additional benefit of being an investment account so that your gift grows with the years. 

Contact a Fort Worth, TX Estate Planning Lawyer

Giving a substantial gift to your grandchildren can positively affect their future by setting them up on the right path. If you want to ensure that the gift goes to your grandchildren with minimal taxation, an experienced Fort Worth, TX estate planning attorney can help you do so. Our estate planning attorney at Gonzalez Law, PLLC has the experience to advise you on tax considerations when planning gifts for your grandchildren. Call our offices at 817-349-7330 for a complimentary consultation today.