You can gift your adult child up to $18,000 in 2024 without filing a gift tax return. Filing a gift tax return doesn't necessarily mean owing gift tax unless lifetime gifts exceed $13.61 million (in 2024). Paying your adult child for services rendered is not a gift and can be deducted as a business expense.
Solution – Revocable Trust
A Revocable Living Trust allows you to title the assets in the name of the Trust rather than individuals. An adult child may still be a beneficiary of the Trust, yet there is zero risk that the assets will be exposed to any of the beneficiary's creditors.
Custodial accounts (UGMA or UTMA) allow you to gift money or property without immediate tax implications, with the assets managed by a custodian until your heirs reach adulthood.
1. If you give money to your adult children now it won't burden them with taxes. You and your spouse can each give up to $18,000 a year to each of your children tax-free. Even larger gifts typically only count against your lifetime exemption, without your children owing taxes on the gifts.
Bottom Line. California doesn't enforce a gift tax, but you may owe a federal one. However, you can give up to $19,000 in cash or property during the 2025 tax year and up to $18,000 in the 2024 tax year without triggering a gift tax return.
Expenses that parents help their adult kids pay
A full 59% of parents said they financially helped an adult child in the past year, while 44% of adult children said they had received financial help from a parent in the same period. Of those 44% of young adults, the majority (68%) were 18-to-24-years old.
From this perspective, if you are inclined to give, you should gift as much as you can comfortably afford during your lifetime, while remaining aware of the available step-up in capital gain basis for inherited assets. So, gift your assets that have minimal gains and save your most appreciated assets for inheritance.
The annual gift tax exclusion of $19,000 for 2025 is the amount of money that you can give as a gift to one person, in any given year, without having to pay any gift tax. This is up from $18,000 in 2024 and you never have to pay taxes on gifts that are equal to or less than the current annual exclusion limit.
One good way is to leave the inheritance in a trust. The trust can be set up with some provisions, such as making distributions over time.
One way to do this is by leaving the money in a trust. You then can appoint someone as trustee (the person who controls trust assets) who you think will do a good job of doling out the money on behalf of, or to, the beneficiary.
Selecting the wrong trustee is easily the biggest blunder parents can make when setting up a trust fund. As estate planning attorneys, we've seen first-hand how this critical error undermines so many parents' good intentions.
A will may be the least expensive and most efficient choice for small estates with easily transferred assets and simple bequests. A trust without a will can present problems concerning assets outside the trust that become subject to intestacy laws. Larger and more complex estates may benefit by using both arrangements.
Gift tax is paid by the giver of money or assets, not the receiver. The good news is that this threshold is so high that few people end up having to pay the gift tax. These thresholds are referred to as exclusions.
For smaller gifts, the IRS rules for 2025 allow any individual to gift up to $19,000 per year to any recipient without having to consider the potential impact of a taxable gift. A married couple filing jointly may give up to $38,000 to any individual.
In some cases, using a trust can allow you to give to your children tax-free, while retaining limits on how the money is used or when they can access it. Trusts can also help you ensure that the money you gift to an individual is for their use only.
Another key difference: While there is no federal inheritance tax, there is a federal estate tax. The federal estate tax generally applies to assets over $13.61 million in 2024 and $13.99 million in 2025, and the federal estate tax rate ranges from 18% to 40%.
If you received a gift or inheritance, do not include it in your income. However, if the gift or inheritance later produces income, you will need to pay tax on that income.
The U.S. tax code makes it fairly easy to give your children money, stocks or other investments or a piece of the family business. You can transfer up to a certain amount during your lifetime as a gift or at death through a will or revocable trust, free from federal gift and estate taxes.
“Cash is king when it comes to leaving an inheritance,” said Carbone. “It's the simplest asset to deal with in terms of a transfer.”
Rules on giving gifts. Inheritance Tax may have to be paid after your death on some gifts you've given. Gifts given less than 7 years before you die may be taxed depending on: who you give the gift to and their relationship to you.
There is no universally correct age that parents should stop supporting their children once they reach adulthood, as each family will need to make the determination based on what is best for their wallets and to best support their values.
Encourage Realistic Goals: Collaborate with your adult child to set achievable short-term and long-term goals related to their job search. Break down the process into manageable steps such as updating their resume, networking, and applying for a certain number of jobs per week.
You can spend any amount on a dependent without the money being counted as a gift, so the gift tax rules will be irrelevant if your child is considered your dependent, regardless of how old he or she is.