A Grandparent’s Guide to Gifting
By Neil Rose, CFA
You’ve built something meaningful. Here’s how to share it thoughtfully, wisely, and tax efficiently.
There are few things more satisfying than helping the people you love most get a head start in life. Good news: the tax code is quite generous to grandparents who want to give.
The Annual Gift Exclusion
Every year, you can give any person up to $19,000 completely free of gift tax—no paperwork, no forms, no impact on your lifetime exemption. As a couple, you can give $38,000 to a single recipient. A grandparent with four grandchildren can transfer $76,000 per year out of their estate this way, completely tax-free. The exclusion doesn’t carry over; use it or lose it, every December 31st.
The Unlimited Education and Medical Exclusion
Payments made directly to an educational institution for tuition, or directly to a medical provider for care, are completely exempt from gift tax—no limit, not counted against the annual exclusion or the lifetime exemption. You cannot give your grandchild a check to pay their tuition; you must write the check to the school.
529 Plans: The Gold Standard for Education Gifting
Contributions grow tax-free
Withdrawals for qualified education expenses are tax-free
Unused funds can now be rolled into a Roth IRA for the beneficiary (up to $35,000 lifetime, after the account has been held 15 years—a bonus from the SECURE Act 2.0)
Superfunding: Front-load five years of annual exclusions into a 529 all at once—$95,000 per beneficiary from a single grandparent, $190,000 from a couple
Quick Reference: Gifting Options at a Glance
| Method | Annual Limit | Tax-Free Growth? | Restrictions |
|---|---|---|---|
| Annual Gift | $19,000/person | No | None; gift-splitting requires Form 709 |
| Direct Tuition/Medical | Unlimited | n.a. | Must pay institution or provider directly |
| 529 Plan | $19K/yr (or $95K superfunded) | Yes (federal) | Qualified education expenses; Roth rollover requires 15-year hold; up to $35K |
| UTMA/UGMA | $19,000/yr | No | Child controls eventually |
Gifting Tip:
Don’t just write a check! The best outcomes come when grandparents bring their children and grandchildren into conversation about what the money is for, what values it represents, and what the family hopes it will enable.
This material is for informational purposes only and does not constitute tax or legal advice. Please consult your tax professional for guidance specific to your situation.
About the Author
Neil Rose, CFA, is the founder and CEO of Regency Capital Management.
