Gifting money to family members can help show you care and is especially convenient if they live far away. Maybe you’re not sure what they’d like for their birthday, or you’re helping them pay for medical expenses.
Whatever your reason, there are some important factors to consider before sending your gift. Potential tax implications top the list from a legal perspective, especially if you’re sending a large amount. There are also rules of thumb and considerations rooted more in etiquette and family dynamics to keep in mind.
Let’s look at eight rules on gifting money to family in 2024 so you’re as prepared as possible.
1. Understand the recipient’s financial situation
Think about your family member’s financial situation. Is this person struggling with mounting medical bills? Are they able to pay their bills regularly? Have they been trying for years to save to buy a home and are finding it difficult to meet the down payment requirements?
Gifting money to family members can be more helpful than traditional gifts and even meaningful if this person is facing financial hurdles or working toward a goal. For example, if the money you’re gifting will help your loved one pay for their mortgage for several months, it could help give them space to better take care of their children.
2. Identify the purpose of the gift
Why are you giving money in the first place? Is gifting money to this family member for a specific purpose, like books for their college classes? Or maybe your grandson’s hoping to start a business?
Understanding the purpose of your gift can help set clear expectations for how you’d like the money to be spent. Before sending the money, you might have a conversation with the recipient so that they understand the purpose of your gift.
Say you’re gifting money for a wedding, for example. Consider letting the newly married couple know you’d like them to use the money toward the honeymoon, furniture for their new home, or their future home down payment.
3. Determine the amount
One of the most important rules on gifting money to family is to take stock of your financial situation when deciding how much to give. Sure, you want to show your family you care or even support them in their time of financial need.
But don’t overlook your own financial stability. How would your family feel knowing that you’re giving them money while not caring for your own needs?
Whether you’re gifting money for a graduation or a birthday, take a look at your finances first. Think about how much of your budget is going toward your necessities and what’s left over. Don’t lose sight of your own financial goals, like saving for a vacation or retirement, when deciding on the amount you want to gift.
4. Know the tax implications
In certain countries, like the US, you may only be able to gift money to family members tax-free as long as it’s under a certain amount.
For example, IRS rules on gifting money to family in 2024 stipulate that you can gift up to $18,000 to any one person over the course of the year without having to report the gift to the IRS. This is called the gift tax exclusion, and the amount is subject to change every year. Going over the amount doesn’t necessarily mean you or the recipient will pay taxes on the gift. But you may need to file a form with your tax return saying you gifted over the annual exclusion amount. You’d only have to pay taxes if you’ve exceeded your lifetime gift tax exclusion, which in 2024 is $13.61 million.
That’s just the US rule. When gifting money, even to family members, be sure to check the tax rules where you (and potentially your recipient) live. Since tax laws can be complicated, it could be best to consult a financial professional to understand the tax implications of your gift.
5. Understand the legal considerations
Aside from taxes, there may be legal considerations when you’re gifting money to family members—especially if you want to give a significant amount. In some cases, you may need to provide official documentation to prove that it’s a gift.
For example, in both the UK and the US, you can gift family members money to put toward a down payment on a house. While there are generally no limits on the amount, home loan lenders require that you provide a written letter officially stating you’re giving the money as a gift. Some other requirements could be showing where the money came from and your government-issued ID.
Before doing anything, consider checking the legal implications with a trusted attorney in your jurisdiction.
6. Analyze the impact on your relationships
Money can be both a source of happiness and tension. Gifting money to family can feel especially rewarding, knowing you’re helping. However, it can also sometimes create tension or expectations. If you gift money regularly, family members may come to expect that money regularly, and it could do more harm than good when you stop. Or other family members can feel resentful if you’re gifting money to one family member and not others.
It’s ultimately your decision whether you give money to family members, as well as how often and how much. If you feel that there could be negative impacts on your relationships, tread carefully. This might require taking time to communicate to everyone openly and honestly about the purpose of your gift.
7. Set personal boundaries
Part of managing expectations with gifting money is to set clear boundaries around how much and when you’ll give. Perhaps you want to send money online to a family member regularly because they lost their job. In this case, you want to be sure to set clear expectations around how long you’ll send money.
For example, you could let this person know that you’ll only send money for the next four months to help pay for housing until they get a new job. Or you might ask them to let you know if they get a job sooner than within four months so you can stop sending money.
Establishing clear personal rules on gifting money to family can protect your financial well-being and your relationship with your family.
8. Consider gift alternatives
At the end of the day, it is up to you how you want to approach the etiquette and rules of gifting money to family. Sure, you should adhere to tax and legal requirements. But you also need to consider your personal limits and boundaries.
Sometimes, giving a large amount of money isn’t an appropriate solution, such as if you can’t afford to do so. You can find other ways to support your family member instead.
For example, if all you can afford to do is to help pay for diapers for your niece’s newborn son, that’s fine. Or, if you’re concerned that your son can’t find a reliable car to commute to and from work, consider helping him cover his car loan payments.
Send money to family and friends with Western Union
Whether you’re gifting money to friends or family across town or across the globe, Western Union has you covered. Download the Western Union® app today, send money online, or visit an agent location near you to get started. We even have options for sending money to someone without a bank account.
FAQs
You can gift a family member up to $18,000 per person in 2024 in the US without risking paying taxes on the amount. This is called a gift tax exclusion. Though you can technically give more in 2024 if you haven’t exceeded your lifetime gift tax exclusion, you will have to fill out a separate tax form indicating the amount.
You can gift money to family members tax free by staying under the gift tax exclusion amount in your jurisdiction or directly paying for goods and expenses. For example, if you want to help pay for a couple’s honeymoon, you can book the hotel for them.
The amount you’re allowed to give to a family member will depend on factors such as how much you can afford, what the gift is for, and the legal rules in your jurisdiction. Technically, you can gift any amount, though consider if it’ll impede your finances and whether you or the recipient must pay taxes on the gifted funds.
