12 financial gifts to empower your loved ones

Giving gifts is a way to show appreciation for those closest to you. If you’re looking for meaningful gestures that go beyond the typical consumer goods, consider these financial gifts that can benefit the long-term financial well-being of your friends and family.

We can help you identify impactful and tax-efficient gift opportunities to financially empower the loved ones in your life.

In this article:

1. Give a cash gift
2. Contribute to a 529 plan
3. Pay for tuition
4. Pay off student debt
5. Pay medical expenses
6. Earmark funds for their Roth IRA
7. Gift stocks and bonds
8. Help with a home down payment
9. Purchase a life insurance policy
10. Create a custodial account
11. Make a charitable donation in their name
12. Give the gift of financial advice
13. Questions to discuss with us

1. Give a cash gift

One of the most flexible financial gift ideas is cash. Since your loved ones are most familiar with their financial situation, they are likely in the best position to maximize the impact of the funds. For 2024, you’re allowed to gift an individual up to $18,000 per year (or $19,000 for 2025) without incurring a federal gift tax liability. This is known as the annual gift tax exclusion, which typically increases every year based on inflation. Any gift over that amount will count toward your lifetime federal gift tax exclusion — currently set at $13.61 million for 2024 (or $13.99 million for 2025) — which is the amount you can give away over the course of your life without triggering gift or estate taxes. (Note: There’s a possibility that the current lifetime gift tax exclusion returns to a lower amount in 2026, unless Congress acts to extend current law.)

2. Contribute to a 529 plan

If you want to help a loved one — be it a child, niece or nephew, grandchild or family friend — save and pay for higher education down the road, consider opening or making a gift to a 529 plan or Coverdell education savings accounts, which are investment accounts specifically designed for educational expenses. The money in a 529 plan grows tax-deferred and withdrawals are tax-free when used by an eligible student for qualified education expenses like room and board, tuition and books. Additionally, up to $35,000 in leftover 529 plans funds can now be used to jumpstart the beneficiary’s retirement savings in a Roth IRA, if the 529 plan account is at least 15 years old for the current beneficiary and meets certain other requirements.

3. Pay for tuition 

You can also support loved ones currently enrolled in private school, college or graduate school by directly paying their tuition. When you pay the educational institution directly, you can gift any amount without it counting toward your annual gift tax exclusion or lifetime gift tax exemption.

4. Pay off student debt

If your loved one is a student loan borrower, you can relieve some of that burden by paying off their student debt. As previously mentioned, you can gift an individual up to $18,000 per year in 2024 without incurring a federal gift tax liability. Helping your loved one pay off student debt is not only a profoundly generous gift, but also a powerful investment in their future.

5. Pay medical expenses

After a significant health event, medical bills can make an already challenging situation more difficult. You can help your friend or family member get through the financial stress of doctor and hospital bills by paying some or all their medical expenses. Any medical bills paid directly to a medical provider don’t technically count as a gift and are exempt from the annual gift tax exclusion and lifetime gift tax exemption.

6. Earmark funds for their Roth IRA

Encourage your loved one to start saving for retirement or boost their current retirement account balance by gifting them cash, which then can be used to fund their Roth IRA. This individual retirement account allows after-tax contributions to grow and be withdrawn tax-free.

The person for whom the account is opened must have earned income, and contributions to the Roth IRA cannot exceed their taxable income for the year or the annual limit set by the IRS.  For example, if your grandchild works a part-time job and makes $5,000 in one year, that is the maximum amount you can contribute to a custodial Roth IRA on their behalf that year.

7. Gift stocks and bonds

With the ability to increase in value and earn interest, stocks and bonds can continue to benefit loved ones over time. Stocks can be gifted by transferring ownership to an existing brokerage account or a new one you open in the name of a loved one. For minor gift recipients, this exchange will need to take place in a custodial account.

A word of caution: Gifting stocks can lead to gift taxes if the value exceeds the annual gift tax exclusion and lifetime gift tax exclusion. Additionally, the recipient may be liable for capital gains taxes if and when they sell these assets. For savings bonds, the recipient will be taxed when they cash in the bonds and then declare the total amount on their federal income tax return.

8. Help with a home down payment

Homeownership is a dream for many, but the upfront financial costs associated with the purchase can be overwhelming — and take a long time to save for. But you can help accelerate your loved ones’ path to homeownership by assisting with the down payment. The annual gift tax exclusion and lifetime gift tax exclusion applies in this case, so if the amount you give stays below those limits, it will be tax-free for you and the recipient.

However, when considering a down payment gift, keep in mind that mortgage lenders have rules about who can gift money and how the money is documented and used. Down payment gift rules vary by loan type. For example, conventional loan down payment gift rules state that only family members and romantic partners can gift money. For most loan types, the borrower will also need to provide the lender with a gift letter stating that the money is a gift and not a loan.

9. Purchase a life insurance policy

A life insurance policy can provide more financial security to your loved ones in the event of your death, but it can also make a meaningful gift. The most straightforward way to gift life insurance is to name a friend or family member the beneficiary of your policy, meaning they will collect the policy’s death benefit — which is not subject to federal income taxes — when you pass away.

However, you could consider purchasing a cash-value permanent life insurance policy in the name of your loved one and paying the monthly premiums. This not only gives your loved one life insurance coverage, but it also gives them access to and ownership of the policy’s cash value account, which grows tax-free over time. But know that accessing policy cash value through loans and surrenders may cause a permanent reduction of policy cash values and death benefit, and negate any guarantees against lapse.

10. Create a custodial account

A smart way to teach the children in your life about saving and investing is to open a custodial account for them. A custodial account is a savings or investment account set up and administered by an adult for a minor. There are two main types of custodial accounts: Uniform Transfers to Minors Act (UTMA) accounts — which can hold any kind of asset, including real estate and art — and Uniform Gift to Minors Act (UGMA) accounts, which are limited to financial assets like cash, securities, annuities and insurance policies.

Custodial accounts typically have no contribution limits or withdrawal penalties, though all withdrawn funds must be used solely to benefit the minor beneficiary. Once the minor reaches the “age of termination" — typically 18 or 21, depending on the state of residence — they will take control of the account as funding these types of accounts is an irrevocable gift to the child.

11. Make a charitable donation in their name 

Donating to a cause or charitable organization that’s important to your loved one is a meaningful way to express your appreciation for them, while also supporting their passions and values. If you itemize your taxes, know that you are also able to claim most gifts as a tax deduction on your tax returns up to certain limits.

12. Give the gift of financial advice 

Help your loved ones start their financial journey on the right foot by gifting them a financial plan. We can provide them with personalized financial advice to better understand their own finances and help identify steps they can make toward their financial goals, both big and small.

Make financial gifts with meaning and impact

We can help you understand the different options available and recommend a gifting strategy that can benefit both you and your loved one.