Why We're Gifting Our Kids $4 Million Each for Christmas
Jerry Davidse shares a personal example of using the annual IRS gift exclusion, currently $19,000 per person, to give money to his children. He walks through how that amount, invested in an S&P 500 fund over roughly 50 years, could grow substantially over time, and explains the added value of using gifting to teach children about compounding and long-term investing.
Jerry Davidse shares a personal example of using the annual IRS gift exclusion, currently $19,000 per person, to give money to his children. He walks through how that amount, invested in an S&P 500 fund over roughly 50 years, could grow substantially over time, and explains the added value of using gifting to teach children about compounding and long-term investing.
Key takeaways
- The IRS annual gift exclusion allows up to $19,000 per person to be given without triggering gift or estate taxes.
- Past performance does not guarantee future results, but historically a $19,000 investment held for about 50 years in an S&P 500 fund could grow substantially through compounding.
- Gifting early can double as a teaching tool, giving children hands-on experience with investing and long-term thinking.
- Lifetime gifting can reduce a taxable estate while creating a lasting financial impact for the next generation.
Hi friends. This year, my wife and I have decided to gift our children $4.2 million each for Christmas. Please let me explain how and why we are going to do this. Each year, the IRS allows you to give up to $19,000 per person to a child, grandchild, or anyone else without triggering any gift or estate taxes. For many families, this is one of the most powerful and underutilized wealth-building tools available.
Jake and Emma are 11 and 9 years old today. They have about 50 years until they will begin to think about retirement at age 60. $19,000 placed in the Vanguard S&P 500 fund almost 50 years ago would have grown to more than $4.2 million today with no additional contributions. Think about that. A $19,000 gift today has the potential to change the financial trajectory of your children or grandchildren for decades to come.
And beyond just the $4.2 million, this can be even more meaningful for your family in the following four ways. First, you're teaching financial responsibility early. I plan to regularly meet with Jake and Emma to review these accounts, talk about the investments, and use it as a hands-on learning experience to teach them the power of personal finance and investing. Second, you're helping them experience the power of compounding. It is amazing how large an investment can grow when you have a really long time horizon. Third, you're passing down not just wealth but wisdom, showing them the value of patience, discipline, and long-term thinking. Fourth, and finally, hopefully this will help them avoid the stress that personal finances can cause. Money and personal finance is the number one cause of stress for Americans, according to the American Psychological Association.
Not only will they have this financial safety net throughout their lives, but even more importantly, they will have the education of watching their accounts grow through multiple market cycles, which will help them make better investment decisions on all of the funds they earn and save during their lives.
So, as you think about your own financial plan this season, consider how gifting might fit in. It's one of the few strategies that benefits everyone. It reduces your taxable estate, helps your loved ones grow financially, and creates a lasting impact across generations. At Presilium, we love helping our clients design giving strategies that align with both their hearts and their balance sheets. Thank you for watching, and I look forward to talking with you next Friday morning.
More from our team
Turn insight into a plan
The first conversation is 30 minutes, no preparation needed.