Balancing Generosity and Fairness: A Guide for Parents Gifting to Adult Children

    By: Josh Stromberg, CFP®

    As parents, we want the best for our children, which can often include providing financial support when they need it. Whether it's helping with paying for college, purchasing a first home, or simply giving a monetary gift, gifting to adult children is a common practice. However, it's important to approach this generosity with careful consideration, especially when it comes to ensuring equity among family members and navigating potential tax implications.

    In this guide, we'll explore important factors to consider when gifting to your adult children, including how to maintain equality even when one child may require more financial assistance. We'll also delve into the world of tax-advantaged gifting, estate planning, and tax exemptions to help you make informed decisions.

    Understand Your Goals

    Before delving into the specifics, it's essential to clarify your objectives when gifting to your adult children. Are you looking to provide financial support for specific needs? Do you want to create a fair inheritance for all your children? Are you simply trying to share your wealth while you're alive by doing activities together, like ice skating at The National Mall? Understanding your motivations will guide your decisions and help you tailor your gifts accordingly.

    Equal vs. Equitable Gifting

    As more parents provide financial support to adult children, many are faced with decisions about how to do so fairly when each child's circumstances are different. A 2024 Pew Research Center survey found that 59% of parents with children ages 18–34 provided financial assistance to an adult child in the past year.

    It's important to distinguish between two main approaches to gifting: equal and equitable gifting.

    Equal gifting means giving the same amount to each child, regardless of their individual needs and circumstances. This is typically the simplest way to approach gifting, and can help avoid conflicts over perceived favoritism that may arise when assessing the needs of each child. While this may be the best approach to prevent potential resentment among siblings, it’s possible one child may not receive the full amount of support they need.

    In contrast, equitable gifting takes into account individual circumstances to ensure each child receives a fair share. For example, one child may be financially stable, while another faces significant expenses like student loans or medical bills. In such cases, equitable gifting may involve providing more financial support to the child in need while still giving a smaller gift to the financially stable child. This approach acknowledges the disparities among family members and strives for fairness, but can also cause conflict between siblings since they did not receive equal amounts.

    Leverage Tax-Advantaged Strategies

    Gifting money to your adult children can have tax implications, both for you and the recipients. To maximize the benefits while minimizing the tax burden, consider the following strategies:

    • Annual Gift Tax Exclusion: In the United States, there's an annual gift tax exclusion that allows you to gift a certain amount of money to each child without impacting your lifetime exclusion (more on that below). This is $19,000 per donee in 2026. This means a married couple could jointly gift up to $38,000 to each child in 2026. Anything above this amount will require filing a gift tax return to track the reduction in your lifetime exclusion.
    • Lifetime Gift Tax Exclusion: Beyond the annual exclusion, there's a lifetime gift tax exclusion that allows you to gift a more substantial amount without paying gift tax. This is $15,000,000 per person in 2026, and your lifetime exclusion could decrease dollar for dollar if you gift above the annual exclusion. This exemption can be complex and subject to change, and some states have differing exclusion amounts, so it's advisable to consult a financial advisor or tax professional for guidance.
    • Education and Medical Expenses: Some education and medical expenses are not considered a gift and will not impact your annual or lifetime exclusions if you pay the organization directly. For example, if your child needed surgery costing $30,000 then you could pay the hospital directly and still gift the same child an additional $19,000 (the annual exclusion) without negatively impacting your lifetime exclusion.
    • 529 College Savings Plans: If you're considering gifting for education purposes, then 529 college savings plans offer tax advantages worth utilizing. Contributions to these plans grow tax-free and can be withdrawn tax-free when used for qualified education expenses. Additionally, you may be able to rollover some excess funds in 529 accounts to a Roth IRA for the a… Roth IRAs operate similar to 529s from a tax perspective without the restriction of being used for qualified education expenses, making them great gifts to give to your children.
    • Estate Tax Planning: Gifting money to your adult children can also be a part of your overall estate planning strategy. Reducing the size of your estate through strategic gifting can help minimize estate tax liabilities. For example, if you expect to have an estate that is larger than the lifetime exclusion amount, then you can gift up to the annual exclusion amount every year to reduce your estate and stay within the lifetime exclusion limits.

    Consider the Impact on Your Own Finances

    While your intentions may be noble, it's important to assess the impact of gifting on your own financial well-being. Make sure your own financial security is not compromised by overly generous gifts. You can get a loan to help pay for college; however, you can’t get a loan to pay for retirement.

    Open Communication

    To navigate the complexities of gifting to adult children, open and honest communication is key. Talk to your children about your intentions, financial situation, and the reasons behind your gifting decisions. This can help prevent misunderstandings, jealousy, or resentment among siblings. When everyone is aware of your plans, it's easier to maintain harmony within the family.

    Document Your Gifts

    To avoid any future disputes or misunderstandings, you should keep good documentation of your gifts. Keep records of the amounts, dates, and purposes of the gifts. This can help you keep track of your annual & lifetime exclusion amounts, as well as how much each child has received. This documentation can be invaluable in estate planning to help ensure your wishes are carried out as intended.

    If you’re interested in learning more about the estate planning process, connect with a financial advisor.

    Seek Professional Guidance

    Gifting to adult children involves complex financial and legal considerations, all of which can have an impact on your own financial wellbeing. To make informed decisions and navigate the intricacies of gifting, it's highly recommended to consult with a qualified financial advisor or estate planning attorney. They can provide personalized advice tailored to your unique circumstances and goals.

    In Conclusion

    Gifting to adult children can be a meaningful way to support your family members. However, it requires careful thought, planning, and communication. Understanding your goals, embracing equitable gifting, leveraging tax strategies, and seeking professional guidance may help you navigate this process more confidently. Remember that an important aspect of gifting is to balance your generosity with your own financial security, ultimately creating a legacy of financial stability and fairness for your adult children.

    Thinking about gifting to family members?

    Whether you're helping adult children, planning for education expenses, or incorporating gifting into your estate plan, it's important to understand how these decisions fit into your broader financial picture.

    Connect with an EP Wealth advisor to discuss strategies that align with your family's goals and your long-term financial plan. 

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