5 Things to Consider If You’re Giving Money for the Holidays

The holiday season is a time to enjoy friends, family and loved ones. It can also be a time to think about your financial circumstances and the spirit of giving.

If you have reached a point where you have enough financially, you may want to give money or other assets to family members or charities. Before you make a gift, consider how it could affect your taxes and estate plan.

Here are five things to consider when giving during the holiday season.

Holiday Gifting at a Glance

Different gifts can create different tax and estate planning considerations. This quick guide can help you identify the issues to discuss before making a significant gift.

What to Consider When Giving

Sharing your resources can take many forms. You might give money, a vehicle, property or another asset. Each type of gift can create different legal and tax considerations.

Think about what you want the gift to accomplish. Then consider the type of asset, who will receive it and whether you plan to give to a charity.

Federal gift tax rules may apply when you transfer money or property to another person for less than full value. In 2026, the federal annual gift tax exclusion is $19,000 per recipient. A gift above that amount does not automatically create a gift tax bill. However, it may require a federal gift tax return and may affect your lifetime gift and estate tax exemption. For more information, see the IRS guidance on the 2026 federal annual gift tax exclusion.

1. You Want to Create a Foundation or Give to Charity

You do not have to be Bill Gates or Warren Buffett to be charitable. A donor-advised fund (DAF) can provide another way to make charitable contributions.

A DAF generally works like a charitable account. You contribute cash or other eligible assets to a sponsoring organisation. The sponsoring organisation then takes legal control of the assets. You can still advise the organisation about how it distributes or invests the funds. The IRS provides additional information about how donor-advised funds work.

You may qualify for a charitable deduction when you contribute to a DAF. The deduction depends on the type of contribution and the applicable tax rules. You also need to meet the IRS requirements for substantiating the contribution.

Consider Charitable Gifts From an IRA

If you want to make a charitable gift from an IRA, a qualified charitable distribution (QCD) may provide another option. You generally must be at least age 70½ to make a QCD. The IRA administrator must also make the payment directly to an eligible charity. The IRS provides more information about qualified charitable distributions from IRAs.

Charitable giving rules can change over time. Beginning with the 2026 tax year, taxpayers who do not itemise deductions may qualify for a limited federal deduction for certain cash charitable contributions.

If you are considering a large charitable gift or an IRA distribution, speak with your tax adviser and an estate planning attorney before making the gift.

2. Your Grandchildren Need Money for College

A 529 college savings plan can help you save for a child’s future education. Money in the plan can grow tax-free. Withdrawals can also remain tax-free when you use them for qualified education expenses.

A grandparent can create a 529 plan for a grandchild. You can also contribute to a 529 plan that a parent already established.

Your choice may affect financial aid and estate planning in different ways. Consider those issues before deciding how to fund the account.

Consider Paying Tuition Directly

If your child or grandchild already attends college, you may also consider paying tuition directly to the educational institution.

Federal gift tax rules provide an educational exclusion for qualifying tuition payments. To qualify, you must make the payment directly to the educational institution. The payment must also cover tuition. See the IRS guidance on the educational exclusion for gift tax purposes for the applicable rules.

The exclusion does not generally cover books, supplies, room and board or other similar expenses. The IRS also treats contributions to a 529 plan differently from direct tuition payments.

These rules can make the timing and structure of an education gift important. Consider your family and financial circumstances before choosing an approach.

3. Your Car or Boat Is Not Being Used

If you have a car or boat that you no longer use, you may consider giving it to a family member or another person.

Gifting a Car or Boat to a Family Member

When you give a vehicle or boat to someone else, make sure you complete the required title transfer. You should also keep records showing the property’s value and the details of the gift.

The 2026 federal annual gift tax exclusion is $19,000 per recipient. If the value of your gift exceeds the applicable annual exclusion, you may need to file a federal gift tax return. That does not necessarily mean you will owe gift tax.

Your lifetime gift and estate tax exemption may cover some or all of the taxable gift. For 2026, the federal basic exclusion amount is $15 million for an individual.

Tell your tax preparer about significant gifts of property. They can help determine whether you need to file a gift tax return and how to report the transfer.

Donating a Vehicle to Charity

You could also donate the vehicle or boat to a qualified charity. Depending on your circumstances, the donation may qualify for a charitable contribution deduction.

The amount of your deduction can depend on what the charity does with the property. Special IRS rules apply to donated vehicles, including situations where the charity sells the vehicle.

Keep the documentation you receive from the charity. Additional substantiation and reporting rules can apply when you claim a deduction of more than $500 for a donated vehicle. Review the IRS rules for vehicle donations before making the contribution.

4. You Want to Give a Vacation Home to the Next Generation

A vacation home can become a valuable family asset. It can also create disagreements if you do not plan the transfer carefully.

First, Ask Whether They Want the Property

Start by asking whether your loved ones actually want the home. You may be surprised to learn that they do not. If nobody wants the property, selling it may make more sense than transferring it.

If your family wants to keep the home, discuss the practical issues before transferring ownership.

Consider How the Family Will Own the Property

One option may involve transferring the property to an LLC and giving ownership interests to your children. The LLC operating agreement can establish each member’s rights and responsibilities.

You should also decide what happens if someone wants to sell their share. The ownership documents can address who may buy that interest and whether the other owners have a right of first refusal.

You should also consider what happens if an owner divorces. The family may want to limit who can become an owner of the property.

These transactions can become complicated. They can also create legal, tax and property ownership issues. Speak with an attorney before transferring a vacation home into or out of an LLC.

For more information about how trusts and other estate planning tools can help with asset transfers, explore Littleton Legal’s Wills & Trusts services.

5. Your Children Have Different Needs

Sometimes fair does not mean equal. Your children may have different financial needs because of a disability, age or financial circumstances.

For example, one child may need financial help now. Another child may have greater financial stability and need less assistance.

Consider Your Estate Plan

You may decide to give part of one child’s expected inheritance during your lifetime. You may also decide to divide your estate unequally after your death.

Whatever you decide, explain your goals clearly in your estate plan. A clear plan can help reduce confusion and potential conflict among your beneficiaries.

You may also consider leaving a letter that explains your reasons for dividing your estate in a particular way. A letter cannot replace your legal documents, but it can provide context for your decisions.

Talk to an Estate Planning Attorney

You may also consider including a no-contest clause in your will. However, the effect and enforceability of these clauses can depend on state law and the circumstances.

Talk with an estate planning attorney before relying on a no-contest clause or another strategy to reduce potential disputes.

Key Takeaways for Holiday Gifting

• Think about the tax and estate planning consequences before making a significant gift.
• The 2026 federal annual gift tax exclusion is $19,000 per recipient.
• A gift above the annual exclusion does not automatically mean you will owe gift tax.
• Direct tuition payments to a qualifying educational institution may qualify for the federal educational exclusion.
• Charitable gifts can have different tax consequences depending on the type of gift and your circumstances.
• Large gifts of property may require additional planning and documentation.
• A vacation home can create ownership and family issues if you do not establish clear rules before transferring it.
• An estate plan can help you address different financial needs among your children and other beneficiaries.

Planning to Give a Significant Gift This Holiday Season?

A thoughtful gift can help your family, support a charity or pass an important asset to the next generation. However, the right approach depends on your goals, the type of gift and your overall estate plan.

Before you transfer money, property or another significant asset, it is worth understanding the legal and tax consequences.

Littleton Legal can help you review your estate planning and gifting options.

Explore Littleton Legal’s estate planning services and contact the firm to discuss your gifting goals.