Giving While Living: A More Meaningful Way to Pass Down Wealth
Quick Take
The strong market of recent years has left many families with more wealth than expected, creating an opportunity to think beyond traditional inheritances and consider giving during life when children or grandchildren may need support most.
Lifetime gifts can be meaningful and tax-efficient through annual exclusion gifts, larger gifts using the lifetime exemption, or direct payments for tuition and medical expenses, though families should be thoughtful about basis, taxes, fairness, and their own financial security.
Done carefully, giving while living can help families align wealth with their values, support the next generation at important life stages, and allow parents and grandparents to see the impact of their generosity.
The strong stock market of the last several years has left many families in a position they may not have expected. Years of saving, investing, rising home values, and market growth have created more wealth than some parents and grandparents ever thought they would have.
That success often leads to a different kind of planning conversation.
Not just, “How much will I leave behind?”
But, “Could some of this do more good while I’m still here?”
A recent Wall Street Journal article explored this very idea: families passing down money during life rather than waiting for a traditional inheritance. The article highlighted parents and grandparents helping with housing, education, rent, childcare, and other major life expenses.
It is a topic worth thinking about because the timing of a gift can matter as much as the amount. An inheritance received at age 60 may be appreciated, but it may not change the course of someone’s life. Support received at 30 or 35 — when a child is buying a first home, raising young children, starting a career, or trying to build financial footing — can be far more meaningful.
The Joy of Seeing Wealth Put to Work
Estate planning naturally tends to focus on what happens after death: wills, trusts, beneficiaries, taxes, and how assets will eventually be divided. All of that matters. But there is another side to planning that does not always get enough attention.
Lifetime giving allows parents and grandparents to see the impact of their wealth.
That may mean helping a grandchild graduate with less debt. It may mean helping an adult child make a down payment on a home. It may mean funding part of an education, helping with medical expenses, or simply giving a young family more breathing room during a demanding stage of life.
For many people, that is more rewarding than leaving a larger inheritance someday. The money is not just being transferred. It is being used, right now, to create stability, opportunity, and memories.
The Annual Gift Tax Exclusion: Small Gifts Can Add Up
One of the simplest ways to give during life is through the annual gift tax exclusion.
In 2026, an individual can give up to $19,000 per recipient without using any of their lifetime estate and gift tax exemption or requiring a federal gift tax return. A married couple can combine their exclusions and give up to $38,000 per recipient in a single year.
Because the exclusion applies separately to each recipient, the numbers can become meaningful.
For example, a married couple with three grandchildren could give $38,000 to each grandchild in 2026. That would allow them to transfer $114,000 in one year without using any of their lifetime exemption. If they also have two adult children, they could give $38,000 to each child as well, bringing the total to $190,000 in one year.
Repeated over time, annual gifts can move a significant amount of wealth to the next generation. Just as important, they can do so gradually, which often feels more comfortable than making one large gift all at once.
These gifts do not have to be dramatic to matter. Annual contributions to a 529 plan, an investment account, or a savings account can build meaningful support over many years.
The Lifetime Estate and Gift Tax Exemption
For larger gifts, families may also use part of their lifetime estate and gift tax exemption. In 2026, the federal basic exclusion amount is $15 million per individual. For married couples, with proper planning and portability, the combined amount can be substantially higher.
That means many families can make significant lifetime gifts without actually paying gift tax. However, gifts above the annual exclusion generally require filing a federal gift tax return and reduce the amount that can later pass free of federal estate tax.
For families with larger estates, lifetime gifting can be especially powerful because future growth on gifted assets may occur outside the donor’s estate. In other words, the gift itself matters, but so does the appreciation that may follow.
Still, large gifts should be approached carefully. Parents and grandparents need to be confident they are not giving away assets they may later need for retirement, healthcare, long-term care, taxes, or their own lifestyle.
Generosity is wonderful. But it should not come at the expense of the giver’s own financial security.
Direct Payments for Education and Medical Expenses
There is also a helpful planning rule that many families overlook.
Payments made directly to an educational institution for tuition or directly to a medical provider for qualified medical expenses are not treated as taxable gifts. These payments do not count against the annual gift tax exclusion or the lifetime estate and gift tax exemption.
A grandparent may pay a grandchild’s private school or college tuition directly to the school. A parent may help an adult child with medical expenses by paying the provider directly. These payments can be made in addition to annual exclusion gifts.
The key word is directly. The payment generally needs to go to the school or medical provider, not to the child or grandchild as a reimbursement.
Lifetime Gifts Are Not Always Better Than Inheritances
As appealing as lifetime giving can be, it is not always the best answer.
One reason is cost basis. When appreciated investments are gifted during life, the recipient generally receives the donor’s original cost basis. If the child or grandchild later sells the investment, they may owe capital gains tax based on that original basis.
By contrast, assets inherited at death may receive a step-up in basis. That generally means the cost basis is adjusted to the value at the date of death, which can reduce or even eliminate capital gains tax on appreciation that occurred during the original owner’s lifetime.
That does not mean families should avoid lifetime gifts. It simply means the choice of what to give matters.
Cash is simple. Appreciated stock may or may not be the best asset to give. Other assets may make sense depending on the family’s estate tax exposure, income tax situation, charitable goals, and overall plan.
Helping Without Hurting Motivation
Of course, these decisions are not just about taxes. They are also about family, values, and judgment.
Many parents and grandparents want to help, but they do not want to remove the incentive for children and grandchildren to build productive, independent lives.
The goal is not to make life effortless. The goal is to make life more stable, more secure, and more opportunity-rich.
The most effective gifts often support effort rather than replace it. Helping with a down payment may allow a young family to buy a first home, but the child still has to maintain the home and pay the mortgage. Helping with education may reduce student debt, but the student still has to do the work. Seeding an investment account may teach long-term discipline, but the recipient still needs to learn how money grows and how quickly it can disappear.
Families also need to think about fairness. Some gifts are easy to explain. Others are more complicated.
One child may need help with medical bills. Another may need help with childcare. Another may be financially independent and not need help at all. Equal is not always the same as fair, but unequal gifts can create hurt feelings if expectations are not handled carefully.
There is no perfect formula. But there should be a thoughtful one.
Practical Ways to Give During Life
Families interested in lifetime giving have several options.
Annual cash gifts can provide flexibility and simplicity. Contributions to 529 plans can help fund education and may offer state tax benefits, depending on the state. Direct tuition or medical payments can provide support without using gift tax exemptions. Gifts to investment accounts can help children or grandchildren start building long-term wealth. Trusts can provide more structure and protection when larger amounts are involved.
For younger beneficiaries, custodial accounts or trusts may be appropriate. For adult children, outright gifts may be simpler. For families concerned about divorce, creditors, taxes, or spending habits, more formal planning may be needed.
The right strategy depends on the family, the amount involved, the maturity of the recipient, and the purpose of the gift.
Start With Your Own Financial Security
Before making substantial gifts, parents and grandparents should start with their own plan.
Can they comfortably support their retirement income needs?
Have they planned for healthcare and possible long-term care costs?
Would they still be comfortable if markets declined, inflation remained higher than expected, or they lived longer than planned?
Are the gifts coordinated with their estate plan, tax plan, and investment strategy?
The best lifetime gifts are made from a position of confidence. They should create joy and opportunity for the next generation without creating anxiety for the giver.
A More Intentional Inheritance
The traditional inheritance model assumes wealth transfers at death. For many families, that will still be part of the plan. But it does not have to be the entire plan.
Giving during life can help children and grandchildren at moments when support may matter most. It can also allow parents and grandparents to see the impact of their generosity firsthand.
A thoughtful gifting plan is not about spoiling children or giving away too much too soon. It is about aligning wealth with family values. It is about helping when help matters. And it is about recognizing that a legacy is not only what is left behind.
Sometimes, it is what gets put to good use while we are still here.
For families with the ability and desire to help, the question is not simply whether they can afford to give. The better question is how to give wisely — in a way that supports family, preserves financial security, and fits within the broader estate, tax, and investment plan.
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