The year-end holiday season is viewed by many clients as a time to make gifts to younger family members, including both kids and subsequent generations of grandchildren.
The rules for gifting to adult children are themselves somewhat complex, warns Jane Ditelberg, director of tax planning for The Northern Trust Institute and author of the Tax News You Can Use blog series, but making gifts to minors presents even more challenges.
In a new post, Ditelberg details the ins and outs of tax-efficient gifting to minor children. As she describes, gifts to minors must be structured so that either an adult or a corporate fiduciary holds the assets for the beneficiary until they come of age.
If the donor prefers to make the gift in trust, the transfer must be to one of three specific types of trusts for the gift to qualify for the annual exclusion. 2025 tax legislation also introduced the Trump Account for 2026 — essentially an IRA for minors that is another way to make gifts to minors safely.
For many clients, Ditelberg says, navigating this complexity is well worth the effort, because the potential tax savings are significant, and proactive gifting over long periods of time can significantly reduce future anticipated estate taxes.
“At an all-time high in 2025, the gift tax annual exclusion is one of the most well-known and effective ways to reduce the size of an estate for estate tax purposes,” Ditelberg writes. “Gifts that qualify are not subject to federal gift tax and do not use any of one's lifetime exclusion amount.”
See the slideshow for details on seven effective techniques for tax-efficient gifting to minor children this winter holiday season.
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