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By Bernard A. Krooks, Certified Elder Law Attorney
Special Guest Contributor: Amy C. O’Hara, Certified Elder Law Attorney

As 2026 draws to a close, many people focus on holiday preparations and making plans for the new year. However, the final months of the year also offer valuable opportunities to reduce taxes, support loved ones, and make important financial decisions. 

Take Advantage of Annual Gift Tax Exclusions: One of the simplest ways to transfer wealth to the next generation is through annual exclusion gifting.

In 2026, you can give up to $19,000 to any number of individuals without using your federal lifetime gift and estate tax exemption. Married couples can give $38,000 per recipient, subject to gift-splitting rules.

For example, a married couple with three children and five grandchildren can transfer up to $304,000 in 2026 without reducing their lifetime exemptions.

To qualify for the annual exclusion, you must complete these gifts by December 31, and the funds must clear your account before year-end. Certain gifts to trusts do not qualify for the annual exclusion, even if the amount gifted falls within the annual exclusion limit, unless the trust contains special provisions that allow the gifts to qualify.  Also, unused annual exclusions do not carry forward to future years.

Gifts that exceed the annual exclusion do not automatically trigger gift taxes. Instead, these gifts reduce your available lifetime federal gift and estate tax exemption and require you to file a gift tax return.

Pay Tuition and Medical Expenses Directly: Many families overlook another valuable gifting opportunity: paying someone else’s tuition or medical expenses directly.

Federal gift tax law allows you to pay qualifying tuition expenses directly to an educational institution without using your annual gift tax exclusion, regardless of the amount. This applies to tuition at qualifying schools, including private elementary and secondary schools and colleges. It does not extend to room, board, books, or other educational expenses.

For example, grandparents can pay a grandchild’s college tuition directly to the university and still give that grandchild an additional $19,000 in 2026.

Similarly, you can pay qualifying medical expenses, such as a family member’s surgery, dental care, or other medical treatment, directly to the medical provider without using your annual gift tax exclusion, regardless of the amount paid.

The key is making payments directly to the institution or provider rather than reimbursing the individual.

Consider Funding a 529 College Savings Plan: For families interested in helping children or grandchildren with future education expenses, a 529 college savings plan offers another tax-advantaged opportunity. A special five-year election allows an individual to contribute up to $95,000 in 2026 to a beneficiary’s 529 plan and treat the contribution as spread over five years for gift tax purposes. Married couples can contribute up to $190,000. However, this election uses the annual gift tax exclusion for that beneficiary for five years, meaning that additional gifts to the same beneficiary during that period will require reporting on a gift tax return.

Review Retirement Distributions and Charitable Giving: If you are subject to required minimum distributions (RMDs) from retirement accounts, confirm that you have satisfied your distribution requirements before year-end. Failure to take an RMD can result in significant tax penalties.

Individuals age 70½ or older can also consider qualified charitable distributions (QCDs), which allow them to transfer up to $111,000 in 2026 directly from their IRA to qualifying charities. These distributions can satisfy all or part of an RMD while excluding the qualifying amount from taxable income.

For those who regularly support charitable organizations, this can be more tax-efficient than withdrawing funds and then making a donation.

Consider the Impact of Gifts on Long-Term Care Planning: Before making substantial gifts, consider whether you or your spouse might need long-term care in the future.

While annual exclusion gifts offer federal estate and gift tax advantages, they are not automatically exempt from Medicaid transfer rules. In New York, gifts made within five years before applying for nursing home Medicaid can create eligibility penalties, even when the gifts fall within the annual gift tax exclusion.

This distinction is particularly important for older adults considering transferring assets to children or grandchildren.

Start Planning Before the Deadline: Year-end planning involves more than minimizing taxes. It provides an opportunity to use available financial and benefits strategies while protecting your long-term security.

Whether you are considering gifts to family members, helping with education expenses, or evaluating retirement distributions, thoughtful planning before December 31 can help you enter 2027 with greater financial confidence.

Bernard A. Krooks, Esq., is a founding partner of Littman Krooks LLP. He was named 2021 “Lawyer of the Year” by Best Lawyers in America® for excellence in Elder Law and has been honored as one of the “Best Lawyers” in America since 2008. He was elected to the Estate Planning Hall of Fame by the National Association of Estate Planners & Councils (NAEPC). Krooks is past Chair of the Elder Law Committee of the American College of Trust and Estate Counsel (ACTEC). Mr. Krooks may be reached at (914-684-2100) or by visiting the firm’s website at www.littmankrooks.com.