Donations and Gift Giving
How to Be Generous Without Being Foolish
By The Bold & The Wise Editorial Team Wednesday, May 27, 2026 · 9 min read Categories: Legal, Money & Family, Wednesday
Editor’s note: The tax and financial guidance below reflects general practice for adults over 55 and is not a substitute for tailored advice from a qualified accountant or attorney. Tax rules and dollar thresholds change annually; please confirm current figures with your own advisors before acting on any specific recommendation.
Generosity is one of the better privileges that comes with reaching the chapter of life this site is written for. By the time you are 55, you have probably accumulated some combination of savings, equity, retirement accounts, real estate, and the steady sense that you have enough. Generosity follows naturally — toward family, toward friends, toward the institutions and causes that have shaped your life.
The problem is that most people do generosity inefficiently. They write checks. They make gifts directly from their checking accounts. They give to charities they have not vetted, in amounts they cannot deduct, through vehicles that produce dramatically worse tax outcomes than alternatives that take roughly the same effort.
This article is going to walk you through the mechanics. Not because the mechanics matter more than the generosity — they do not — but because understanding the mechanics lets you give more, to more people and more causes, with the same amount of money. And because the tax code, for once, treats the 55-and-better demographic remarkably well if you know which doors to walk through.
The Two Categories
Before any tax discussion, separate your giving into two buckets that the IRS treats very differently.
Charitable giving is what you direct to qualified nonprofit organizations — churches, universities, hospitals, museums, food banks, scientific research organizations, and the entire spectrum of 501(c)(3) organizations. The tax code provides significant deductions and special vehicles for this category.
Personal gifts are what you give to individual human beings — your children, grandchildren, nieces and nephews, friends, and anyone else you care about. The tax code treats these as gifts in the legal sense, with their own rules around annual exclusions and lifetime exemptions.
These categories do not overlap. Money you give to a charity is a deduction; money you give to your daughter is a gift. The rules, vehicles, and strategies are different for each.
Charitable Giving: The Mechanics
For most adults over 55 with even modestly complex finances, charitable giving offers four vehicles that are dramatically better than writing a check from your checking account. Most people use none of them.
The Qualified Charitable Distribution from your IRA. If you are 70 1/2 or older, you can direct your IRA custodian to send money directly to a qualified charity. The distribution counts toward your required minimum distribution for the year, but it does not show up as taxable income on your return. For donors who do not itemize — which is most retirees today, since the standard deduction is large — this is meaningfully better than withdrawing from the IRA, paying income tax on the withdrawal, and then writing a check. The QCD lets you give without paying income tax on the money first.
The current limit is significant — well over one hundred thousand dollars per year per individual, adjusted for inflation. For couples, both spouses can make QCDs from their own IRAs. If you are charitably inclined and over 70 1/2, this is the single most important tool in your kit.
Donating appreciated stock instead of cash. If you own stock or mutual fund shares that have grown significantly since you bought them, donating those shares directly to a charity is meaningfully better than selling them, paying capital gains tax, and donating the after-tax proceeds. When you donate appreciated shares directly, you get a deduction for the full market value, and you owe no capital gains tax on the appreciation. The charity, being tax-exempt, can sell the shares without paying tax either. Both sides win.
This works particularly well for shares you have held for years that have grown substantially — old employer stock, long-held mutual fund positions, individual stocks bought decades ago. The capital gains you would otherwise owe disappear entirely.
Donor-advised funds. A donor-advised fund is essentially a charitable holding account. You contribute money or appreciated assets to the fund in a given year, take the deduction in that year, and then recommend grants to specific charities over the years that follow. This separates the timing of the tax deduction from the timing of the actual charitable giving — useful for people with a high-income year (you sold a business, you received a large bonus, you exercised stock options) who want the deduction now but want to spread the giving over time.
Major brokerages — Fidelity, Schwab, Vanguard — all offer donor-advised funds with low minimums and reasonable fees. Setting one up takes about an hour online.
The bunching strategy. Because the standard deduction is large, many retirees who give modestly each year never itemize and therefore receive no tax benefit for their giving. The bunching strategy concentrates two or three years of charitable giving into a single year, pushing your itemized deductions above the standard deduction for that year, and then takes the standard deduction in the in-between years. A donor-advised fund makes this particularly easy — you bunch the contributions into the fund in year one, take the deduction, and then recommend grants over the following years.
A Quick Word on Vetting Charities
Before you give meaningfully to any organization, verify that it is a legitimate, well-run 501(c)(3). Two free tools handle this quickly:
Charity Navigator rates thousands of charities on financial health, accountability, and transparency. A four-star Charity Navigator rating is a meaningful signal that the organization spends its money on its mission rather than on its overhead and fundraising.
GuideStar (now operated by Candid) provides Form 990 filings — the annual financial disclosures every nonprofit must file with the IRS. You can see what the organization actually pays its executives, how much it spends on programs versus administration, and what its financial reserves look like.
Both are free. Both take less than five minutes to use. Both will save you from giving to organizations that turn out to be more interested in their own perpetuation than in their stated mission.
Personal Gifts: The Rules That Govern Giving to Family
Now to the other bucket — gifts to individual human beings. The federal gift tax rules govern this, and the rules are more generous than most people realize.
The annual gift tax exclusion is the amount you can give to any single person, in any single year, without triggering a gift tax return or counting against your lifetime exemption. For 2026, that figure is approximately nineteen thousand dollars per recipient per year, indexed for inflation. The number adjusts upward periodically.
Two things to notice. First, the exclusion is per recipient, not per donor. You can give nineteen thousand dollars to each of your three grandchildren in the same year — a total of fifty-seven thousand dollars — and trigger no reporting requirement. Second, if you are married, both spouses can give the full annual exclusion to each recipient, doubling the per-recipient figure to roughly thirty-eight thousand dollars per grandchild per year.
For most families, the annual exclusion is more than sufficient. Gifts at or below this threshold simply happen, with no paperwork and no consequence.
The lifetime gift and estate tax exemption is the larger number that governs how much you can give away over your entire lifetime — and pass at death — before federal gift or estate tax applies. For 2026, this figure stands in the range of fourteen million dollars per individual, or roughly twenty-eight million per married couple. Recent legislation made the higher exemption levels (which had been scheduled to sunset) effectively permanent.
For most readers of this article, this number is large enough that federal gift and estate tax is simply not a concern. You could give significantly more than the annual exclusion to your children and still not approach the lifetime threshold. Reporting requirements kick in when you exceed the annual exclusion to any single recipient — you file IRS Form 709 to report the gift — but the gift still does not trigger tax until you have used up the lifetime exemption.
Direct payment of medical bills and tuition does not count toward either the annual exclusion or the lifetime exemption, if you pay the institution directly. This is a meaningfully underused vehicle for grandparents. If you write a check directly to your grandchild’s university for their tuition, the payment is treated as having been made for the grandchild’s benefit but is not counted as a gift for tax purposes. The same applies to medical bills paid directly to the provider.
This means you can pay full tuition for a grandchild in addition to giving them the annual exclusion in cash for living expenses, all without touching your lifetime exemption.
529 college savings plans offer another option specifically for grandchildren. Contributions to a 529 plan grow tax-free if used for qualified education expenses. A special provision allows you to contribute five years of annual exclusion in a single year — roughly ninety-five thousand dollars per spouse per grandchild — and treat it as if it were spread over five years for gift tax purposes. For grandparents who want to fund a grandchild’s education aggressively, this is the most efficient vehicle available.
The Common Mistakes
A few patterns produce avoidable problems:
Giving from the IRA without using the QCD structure. If you are over 70 1/2 and you withdraw from your IRA and then donate the cash, you are paying income tax on the withdrawal unnecessarily. Use the QCD instead. This is the most expensive mistake we see consistently.
Selling appreciated stock and donating the proceeds. If you intend to give meaningfully to a charity, donate the appreciated shares directly. The capital gains tax you save makes the gift larger at no additional cost to you.
Giving informally to family members in amounts that exceed the annual exclusion without filing Form 709. Failing to file the form when required does not necessarily generate immediate consequences, but it creates problems for your estate after death. If you know you have exceeded the annual exclusion in a given year, file the form. It is not difficult, and your accountant handles it routinely.
Naming the wrong beneficiary on retirement accounts. This is not strictly a giving mistake, but it produces similar effects. The beneficiary designation on your IRA, 401(k), and life insurance policies overrides your will. If you intend to leave those accounts to a charity, name the charity as the beneficiary directly — do not route it through your estate, where it will go through probate, pay taxes, and only then reach the charity.
Giving without coordinating with your lawyer and accountant. We talked about this in last Wednesday’s article. The same principle applies here. A six-figure charitable gift or a substantial gift to a family member is exactly the kind of event where your legal and financial professionals should know what you are doing and coordinate the structure. The cost of a thirty-minute consultation before the gift is trivial compared to the consequences of a poorly structured one.
The Question Underneath the Mechanics
The mechanics matter. The mechanics let you give more, more efficiently, with less friction. But the more important question, and the one that produces the most lasting satisfaction at this stage of life, is what your giving says about your values.
The best givers we know give with intention. They have decided, in advance, what causes matter to them and why. They have decided what role they want to play in the lives of their children and grandchildren financially — and what the limits of that role are. They have written down what they want their giving to accomplish, both in the years of their lives and after they are gone. They revisit these decisions periodically because what mattered most to them at 55 may not be what matters most at 65 or 75.
This is the conversation worth having with your spouse, with your children, with your closest advisors. Not “how much should we give” — but “what do we want this money to do, for which people, in what way.” The mechanical questions answer themselves once the values questions are clear.
You have the means. You have the opportunity. The combination of careful tax planning and clearly articulated values turns generosity from a transaction into a legacy. That is the real point.
Next Friday on The Bold & The Wise: Android Phone Tips — The Settings and Habits That Make Your Phone Dramatically Easier to Live With, Whether You Picked the Phone Yourself or Inherited It from a Helpful Family Member.
Resources That Support Smarter Giving
- A subscription to Charity Navigator’s premium service for deeper organizational research on nonprofits before you give
- A donor-advised fund account at Fidelity, Schwab, or Vanguard for tax-efficient charitable giving
- A simple gift-tracking spreadsheet to log annual exclusion gifts to each family member each year
- A secure document storage solution for keeping Form 709 records and donation acknowledgment letters
- A current edition of a reputable estate planning workbook to keep your wishes and beneficiary designations in one place
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