Gifting money to adult children: Give now or later?

Financially helping family members can be rewarding. However, it pays to proceed thoughtfully.

Perhaps your son asks for help with a down payment on a dream house for his growing family. Maybe your daughter is seeking startup funding for a promising new business. Or maybe you think it would be gratifying to pass some wealth to your family sooner rather than later, so you can see the funds in use.

When gifting money to adult children, it’s important to consider both the financial benefits, tax implications, and emotional implications of your gifting.

How gifting money to adult children impacts your future

The first and most important consideration is to examine any monetary gift in the context of your entire estate. It’s easy to get swept into an adult child’s pressing need or to be overcome with emotion when you’re thinking of passing on your legacy. However, you need to consider your own future first, and make sure you’re protecting your retirement years.

Whatever amount you’re considering giving or its intended use, develop a gifting plan before making any decisions: how much, when and why. Seeing the whole picture can help you understand how much you can gift while keeping what you’ll need.

Tax benefits of gifting money to family members

When it comes to your family’s immediate needs, gifts of cash or assets can potentially reduce your estate tax burden — one of the main motivators for parents considering giving money to children as an early inheritance.

For smaller gifts, the IRS rules for 2025 allow any individual to gift up to $19,000 per year to any recipient without having to consider the potential impact of a taxable gift. A married couple filing jointly may give up to $38,000 to any individual.

Larger gifts may also sidestep tax liabilities if you’re willing to have them count against the lifetime estate and gift tax exemption, which in 2025 is $13.99 million for individuals and $27.98 million for married couples filing jointly.

Read more about who pays estate taxes, how much and when.  

Note that the current gift tax exclusion and estate tax exemption rates put in place by the Tax Cuts and Jobs Act 2017 are set to sunset at the end of 2025 and revert to pre-TCJA levels, which is an estimated $7 million per individual (adjusted for inflation).

Is a trust the right option for gifting money?

The ease of such a gift is beneficial for the recipient, but on the flip side, you’ve given up control of it. Watching your adult children spend money in ways you wouldn’t can quickly sour the joy and satisfaction of giving.

For a little more control over the distribution, you may want to consider a trust. In its simplest form, a trust is an entity, created and funded with cash, assets and investments, which allows you to dictate how your estate is distributed to beneficiaries.

An irrevocable trust, in particular, may be useful if the value of your estate exceeds the lifetime exemption. Although they typically can’t be changed or amended after they’re created, the assets move out of your estate and taxes are paid out of the trust, which can give you greater protection from estate taxes if created properly.

Irrevocable trusts come in various forms, depending on the gifting goals. And although trusts may be adapted to handle many situations, they have limitations. As complex, legally binding arrangements, it makes sense to be aware of their benefits and drawbacks. 

Benefits of gifting through a trust may include:

• The joy of helping your children and seeing their appreciation while you’re still alive.
• An unmatched level of control over gifts to children of any age.
• The flexibility to drive decisions on gifts and philanthropy.
• The option to arrange and structure funding for specific goals, such as lifelong care for children with disabilities.
• Potential tax advantages for beneficiaries.
   

On the other hand, drawbacks of gifting through a trust may include:

• Irrevocable means irrevocable, so whatever restrictions you create will carry on into the future. If you place too much in the trust too early, you may face limited access to cash down the road.
• Mandatory reporting rules in some states require that beneficiaries be informed about trusts and what’s in them.
• Incurring fees for trust administration.

When it comes to monetarily helping your adult children now while still preserving your legacy, a little planning can ease the way and ensure you’re giving the way you intended.

Learn how we can help you work toward your financial goals and support the people and causes you care about, now and in the future.