The holiday tradition of gift-giving is what people are focused on at this time of the year. It may be the perfect time to put a meaningful lifetime gifting plan in place. If you are in the position to help your family members now, gifting during your lifetime is a great way to assist with real life needs while still maintaining some degree of control over how a gift is used. In addition, it gives you the enjoyment of seeing your gifts improve the quality of lives.

Consider starting with the annual exclusion amount. The IRS allows you to give up to $15,000 in 2019 to any number of people without facing any gift taxes, and without the recipient owing any income tax on the gift. Generally, when you give someone a gift that exceeds $15,000 (other than your U.S. Citizen spouse), the government wants to know about it. A gift that exceeds $15,000 is reportable on a federal Form 709, United States Gift Tax Return and may or may not result in a tax due to the IRS depending on your facts and circumstances.

As with most tax laws, there are exceptions. There are some types of gifts that are excluded from that $15,000 cap. If you want to make a gift for someone’s unreimbursed medical or dental bills, medical insurance premiums or qualifying educational tuition, this gift may be exempt from the annual gift limitations. You must pay the doctor, dentist, insurance company or school directly. In the case of tuition, it applies to tuition only. The exemption does not include room and board, books or supplies.

Another gift planning opportunity is a contribution to a college savings plan called a 529 plan. 529 plans may also be used to save and invest for K-12 tuition in addition to college costs. There are two types of 529 plans: college savings plans and prepaid tuition plans. Almost every state has a at least one 529 plan. There is also a 529 plan operated by a group of private colleges and universities. Although the contribution is not exempt from the $15,000 cap, you can make contributions in one year of between $15,000 and $75,000 for someone and can elect to treat the contribution as made over a five-year period. That means you may be able to give $75,000 in one year without triggering the gift tax.

Being in the position to be able to create a meaningful gifting plan is a wonderful opportunity. It can provide people with invaluable help, as well as be a tool used to teach your loved ones how to make good financial decisions. However, first and foremost, take care of yourself. Do not put yourself in a position that you give away more than you can afford.

Before you put a plan in place, be sure to meet with your tax and estate planning advisor. As with any strategy, there is always the possibility that laws may change. In addition to staying current, it is important to develop plans that fit your personal financial situation by taking into consideration other factors such as estate tax, income tax, financial aid and more.