Smart ways to pass wealth on to your children

As year-end tax season approaches, it is worth remembering that one of the most valuable financial moves you can make for your children is to plan carefully for transferring wealth to them. The tax code provides more options than many families realize.

Below is an overview of the main strategies available in 2026:

The annual gift tax exclusion

Each individual may give up to $19,000 per recipient without having to file a gift tax return. A married couple can give $38,000 per recipient. The allowance resets each calendar year, making it one of the most effective yet underused wealth transfer tools.

The lifetime gift and estate tax exemption

More substantial gifts are applied against your lifetime exemption. If changes to the rules are possible, using the exemption sooner rather than later can help protect against a future cut.

Direct payments — unlimited and tax-free

Tuition paid directly to an educational institution or medical bills paid directly to a provider are not treated as taxable gifts. There is no dollar cap, but the payment has to go straight to the school or medical provider rather than being reimbursed later.

529 education savings plans

You can front-load a 529 plan by making five years’ worth of gifts at once. In 2026, that means $95,000 per person or $190,000 for married couples. The money grows tax-free, and unused funds can now be rolled into a Roth IRA for the beneficiary.

Custodial accounts — UTMA (Uniform Transfers to Minors Act)

These accounts are easy to establish, and the child takes full control once reaching the age of majority. They are less flexible than trusts and are subject to kiddie tax rules, at least at the beginning.

Roth IRA for working kids

If your child has earned income, you can give them money so they can contribute to a Roth IRA. Starting tax-free growth early gives those savings decades to compound, making it a powerful long-range strategy.

Trusts

Trusts can provide both control and asset protection. You can structure distributions by age or by milestone, which makes them useful when giving money outright seems too soon.

Gifting appreciated assets 🫵

Giving stock rather than cash can shift future capital gains to the recipient, who may be in a lower tax bracket. If the recipient is a minor, be mindful of kiddie tax rules.

For many families, the best approach is to use several of these tools together. The SKG Team works with clients to incorporate wealth transfer into a broader financial plan. Leave a comment or send a message to get started.