How to Gift Money to Your Loved Ones Now Without Waiting Until Your Passing

If you’ve built up a healthy nest egg in your accounts and find yourself thinking, “I’d rather help my loved ones now than wait until I’m gone,” you’re not alone. Many retirees are choosing to gift money during their lifetime - when it can make the biggest impact. But how do you do that without triggering IRS complications?

Let’s break it down in plain English.

💸 Annual Gift Tax Exclusion

In 2025, you can gift up to $19,000 per person without having to report it to the IRS. Married couples can double that to $38,000 per recipient. That means you could give your child, grandchild, or friend a generous gift today - no paperwork, no taxes.

If you go over that amount, you’ll need to file IRS Form 709. But don’t panic - filing doesn’t mean you owe taxes. It just counts against your lifetime gift tax exemption, which is a generous $13.99 million per person in 2025 (IRS.gov).

🔍 Understanding the Lifetime Gift Tax Exemption

Think of this as your long-term gifting allowance. In addition to the annual exclusion, the IRS lets you give away up to $13.99 million over your lifetime without paying gift tax. You’ll simply report any gifts over the annual limit with Form 709 and subtract that amount from your exemption.

Example: If you give your daughter $119,000 this year, the first $19,000 is excluded. The remaining $100,000 gets reported but doesn’t trigger any tax - just reduces your exemption to $13.89 million. Plenty of room left to share the wealth.

🧾 Gifting from Retirement Accounts

Here’s where it gets a little trickier. You can’t directly gift money from a 401(k) or traditional IRA. You’ll need to withdraw the funds, pay any applicable income taxes, and then gift the remaining amount. If you’re over 59½, you can avoid early withdrawal penalties.

Want to be even more strategic? Consider using Required Minimum Distributions (RMDs) - which are required at age 73 - as your gifting source. You’re required to take them anyway, so why not use that money to help someone you care about?

⚖️ Balance Your Generosity with Your Own Needs

Giving can be deeply fulfilling, but it’s also important to make sure your own financial needs - both current and future - are protected. Think about healthcare costs, long-term care, and how your retirement savings will support your lifestyle down the road. A thoughtful plan lets you give meaningfully without putting yourself at risk.

🎁 Why Give Now?

Helping someone pay off debt, cover medical bills, or fund education today can be life-changing. And let’s be honest - seeing the joy your gift brings is a reward in itself.

Before making large gifts, it’s wise to consult a financial advisor to ensure everything aligns with your broader plan. But if you’re in a position to give, there’s no reason to wait.

Give with intention. Give with joy. And give while you’re here to see the difference it makes. Ready to create a gifting strategy that aligns with your financial goals? Schedule a time to meet with a financial planner from Better Pockets Financial using this link: https://www.betterpocketsfinancial.com/contact

References:

https://www.irs.gov/businesses/small-businesses-self-employed/gift-tax

https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax

Technical Stuff:

This content is for informational purposes only and is not financial, investment, or tax

advice. Investing involves risks, including potential loss of principal. Past performance does not guarantee future results. ESG investments may not be suitable for all investors. Better Pockets Financial is a fee-only Registered Investment Advisor (RIA) acting as a fiduciary. For personalized advice, consult a qualified financial professional.  Reference BPF's website www.betterpocketsfinancial.com for additional information and disclosures.