With the student debt crisis and the slow growth of the economy, many young adults are relying on their parents for financial support. Any assistance given from parents to adult children will technically be considered a “gift” for tax purposes. When the US Congress increased the Estate Tax exclusion, they also unified the Estate and Gift tax exclusions into one lifetime exclusion, meaning any gift made during your lifetime that is in excess of the yearly gift exclusion is subtracted from your total Estate Tax exclusion. So, how much can you give?
The current gift tax exclusion amount is $14,000 per year for each beneficiary. For married couples, that amount is doubled. Parents can give each of their children up to $28,000 per year without having to worry about gift taxes. However, if you gift any amount over that, it will be subtracted from your lifetime exclusion amount ($5.43 million or $10.86 million for couples).
Any gift, not just cash, can count towards the yearly exclusion amount. However, the IRS allows parents to pay for their children’s college tuition directly without it being considered a gift.
As an alternative, parents can also lend their children money, but it must be carefully documented. You must also charge interest of at least the Applicable Federal Rate published by the IRS each month. If things change and your children can no longer afford to pay the note associated with the loan, you can forgive the debt and the debt forgiveness will be considered a gift. No harm, no foul.
Author Bio
Paul Yokabitus
Founder & Estate Planning Lawyer
Paul Yokabitus is the founder of Cary Estate Planning, where he helps North Carolina families protect what matters most through wills, trusts, probate, and special needs planning. Known for his “planning, not paperwork” approach, Paul turns complex legal concepts into clear, practical strategies so clients feel informed and confident at every step. He has been recognized as a Business North Carolina Legal Elite attorney and a Super Lawyers Rising Star, and was named to the Triangle Business Journal’s 40 Under 40. A graduate of Campbell University School of Law, Paul lives in the Triangle with his wife, Alix, and their two sons.
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How We Help North Carolina Families
Paul and his team at Cary Estate Planning are fully committed to creating a personalized experience to develop thorough and comprehensive estate plans. They value their clients and go above and beyond to make sure that no details are missed. I would highly recommend Paul to anyone looking to create an estate plan.
I was referred to Paul by my Real Estate Attorney and I could not say enough about how exceptional the client service has been from everyone I spoke to. The communication is prompt and I feel like they really took the time to answer all my questions and set things up exactly as I wanted, but also recommended things to make it easier on my family down the line.
After attending one of Paul’s estate planning seminars, my husband and I knew we wanted Paul to assist us with our estate planning. His honest, professional approach to this necessary part of life put us at ease with the process. We will continue to recommend Paul and Cary Estate Planning.
We had a great experience working with Paul Yokabitus and the team at Cary Estate Planning to set up our Will and Estate Plan. The process was clear and easy, and in the age of COVID, our signing session was very well done, easy, and safe.
The Cary Estate Planning team will make sure that you have the information you need to be confident in your estate planning decisions. I learned so much from videos, a one-on-one in-person consultation, the website, emails, and a newsletter mailed the old fashioned way. The fee is very reasonable given the importance of estate planning. No matter the size or number of your assets, don’t procrastinate like I did!
Paul is a masterful attorney. He’s very good at taking your intentions and defining that into a durable Trust and Will. Best of all he is as simple and plain-spoken as you like. Or as fast as intellectual as you may be. It’s all about your your speed and your desired outcomes. Would strongly recommend this firm.
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Attorney Offices in Cary, Raleigh, and Chapel Hill
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