Your 2025 Tax-Smart Holiday Gift Guide to Strengthen Your Estate Plan

The holiday season is a time for joy, gratitude, and the spirit of giving. For those focused on long-term financial benefits for themselves and their loved ones, the holidays also present unique gift-giving opportunities. When done correctly, there are many types of gifts that provide substantial benefits to both the donor and the recipient. In this legal blog post, we explore how you can spread holiday cheer while aligning with your estate planning goals.

1. Gifts Towards Education Funds

What better gift than giving someone you love the gift of education? Contributing to a child or grandchild’s 529 account or other education fund is a thoughtful way to invest in their future. These contributions grow tax-deferred, and withdrawals for qualified educational expenses are completely tax-free.

Recent updates to 529 plans provide even more benefits, which allow for or any unused assets in a 529 account to be rolled over into a Roth IRA in the beneficiary’s name without any tax implications or plan penalties in an amount up to $35,000. While it may be difficult to avoid the “fun” gifts such as a toy or new clothes, a contribution to an education fund will continue giving for years to come. For our full legal blog post outlining education savings plans and how Trusts can be used as a supplemental tool, click here.

For example, just a simple $50 contribution today could potentially grow to $200 after 20 years (assuming an annual rate of return of 7.5% with the help of compound interest).

When it comes to estate planning, these types of gifts can also be advantageous to you and your spouse. You can gift up to the annual federal gift tax exclusion limit of $19,000 per recipient in 2025 (or $38,000 for married couples) without incurring gift taxes. This threshold is schedule to remain the same in 2026, remaining at $19,000 per person (or $38,000 for married couples splitting gifts).

Massachusetts does not impose its own state-level gift tax. However, making gifts up to these federal exclusion amounts can reduce the size of your federal taxable estate, which is particularly useful for individuals or married couples with a sizable estate that are approaching or exceed this federal limit.

Even for individuals or married couples that are well under the federal limit, gifting is still an essential strategy to decrease your total taxable estate for Massachusetts estate tax purposes. Money paid as a gift is no longer considered a part of the donor’s estate and thus does not count towards the Massachusetts estate tax exemption of $2 million or the federal exemption which is $13.99 million in 2025. As a result, gifting money towards an education savings account for your loved one can provide tremendous benefits to both you (by reducing your taxable estate) and the recipient (by funding and supporting their future education).

2. Charitable Contributions

The holidays are the perfect time to donate to causes and organizations that we support and to members of our community in need. Giving to a charity is not only a heartwarming act, but also provides potential tax advantages. Under 26 U.S. Code § 170 of the U.S. Tax Code, any charitable contribution is allowed as an itemized deduction on your tax return, which reduces taxable income. Per the IRS, you can deduct up to 60% of your adjusted gross income (AGI) for cash donations made to charities, and individuals that meet certain conditions can deduct qualified contributions made to charitable organization of up to 100% of their AGI. Not only will this type of gift help you save on your annual tax return, but it also allows you to support causes close to your heart. 

For large gifts, consider establishing a donor-advised fund for more structured giving, or meet with an experienced estate planning attorney (such as our team at Lane, Lane & Kelly) to create a Charitable Trust to streamline the distribution of your assets in the most tax-efficient manner. These types of charitable gifts also help you pay down your total taxable estate, which could significantly reduce or even eliminate any Massachusetts or federal estate tax due at death.

3. Investing in Your Retirement

Sometimes the best gift you can give is to yourself. This holiday season, gift yourself a brighter future by making an additional contribution to your retirement account. Investing in traditional retirement accounts, such as an IRA or Roth IRA, offers both immediate tax benefits and long-term estate-planning advantages.

With a traditional IRA, any contributions you make are tax-deductible in the year you make them, reducing your taxable income, while growth is tax-deferred until withdrawals begin in retirement.

A Roth IRA, on the other hand, offers tax-free growth and tax-free withdrawals in retirement, since contributions are made with after-tax dollars.

Keep in mind that traditional IRAs are not subject to income limitations, while Roth IRAs have strict income limitations that must be met in order to contribute. To fully contribute to a Roth IRA in 2025, an individual filing a single return must have AGI under $150,000, and a married couple filing jointly must have AGI under $236,000. In 2026, these income restrictions are increasing to $153,000 for single filers, and $242,000 for those filing jointly.

It is especially beneficial to contribute to your retirement accounts before the end of the year if you have yet to hit the annual contribution limit, which is $7,000 per year for individuals under 50 and $8,000 for those aged 50 or older in 2025. The contribution limits are scheduled to increase in 2026 to $7,500 per year for individuals under 50, and $8,600 for those 50 and older.

These retirement accounts also offer significant estate-planning benefits. For each of your retirement accounts, you can name a pay-on-death beneficiary. This ensures a direct transfer of account assets to your beneficiary upon your death, without needing to go through probate. Avoiding probate is highly advantageous as it eliminates potential delays, the need for court approval to transfer or sell assets, added legal fees and estate expenses, and potential disputes. For a full overview of the benefits to creating a Will and Trust in Massachusetts to avoid probate and keep your matters completely private, read our full legal blog post here.

This year, don’t be afraid to put yourself first and make an impactful gift towards your future. Proper planning with these accounts can help maximize your legacy while offering significant tax advantages during your lifetime.

4. Gifting Real Estate

Before you consider gifting real estate during your lifetime, there are several important considerations. While it is a very generous offer to gift your home or other property to a child or loved one, doing so will have significant long-term tax implications.

Specifically, gifting property at its current value means the recipient inherits your original “carry over” cost basis, not a “stepped-up” basis. For example, if you bought your house years ago for $250,000, and it is now valued at $600,000 and you decide to gift the house to a child, they would receive your $250,000 carry-over cost basis. This means that if the child later sells the house, any gain will be calculated based on that $250,000 basis, potentially triggering a large capital gains tax on the $350,000 increase in value.

Instead, you should strongly consider alternatives such as placing your property into a Revocable Living Trust and naming your children as beneficiaries. These strategies, used with careful planning and legal guidance, can allow you to transfer real estate in the most tax-efficient manner, saving your loved one’s thousands in potential capital gains tax. For a full overview of the stepped-up tax basis and the best ways to approach the transfer of real estate ownership, read our full legal blog post here.

5. Creating or Updating Your Estate Plan

A gift doesn’t always have to be material. One of the most impactful “gifts” you can give your family is peace of mind through a well-prepared estate plan. Use this season as an opportunity to review or create your Will, Trust(s), Healthcare Directives, and other estate-planning documents with the assistance of the experienced attorneys at Lane, Lane & Kelly, LLP in Braintree, Massachusetts. For a full description of our estate planning services and what sets us apart, click here to read more.

Ensuring that your wishes are clearly documented protects your loved ones from uncertainty and gives them a roadmap to carry out your estate exactly as you intended.

Updated Tax Numbers to Keep in Mind

* As of January 1, 2026, under the new law commonly referred to as the One Big Beautiful Bill Act (OBBBA) — the lifetime estate and gift tax exemption increases to $15 million per individual ($30 million per married couple), while the annual exclusion remains at $19,000 per recipient.

Also note that the Massachusetts estate tax exemption for 2026 is scheduled to remain at $2 million dollars.

These updated thresholds mean that generous gifting, either during the holidays or at any other time, can be a powerful tool for reducing your taxable estate and maximizing what you pass on to loved ones.

What This Means for You and Your Family

• More room for tax-free gifting. With the 2026 lifetime exemption at $15 million per person, you and your spouse have an even higher threshold before federal estate or gift taxes apply.
• Annual exclusion still strong. The $19,000 per-person exclusion remains in effect, giving you flexibility to gift smaller amounts each year without dipping into your lifetime exemption.
• Opportunity to reduce future estate tax burden. Gifting, whether to trusts, education funds, or through charitable giving, removes assets (and their future appreciation) from your taxable estate.
• Consider timing and strategy. Because the rules changed under OBBBA, now may be a good time to review your estate plan, trusts, and gifting strategies with legal professionals experienced in estate planning such as the Award-winning attorneys at Lane, Lane & Kelly, LLP.

Happy Holidays and Happy Gifting! 🎁

This holiday season, think beyond traditional presents and explore gifts that align with your long-term goals and values. Whether it’s a financial investment in a loved one’s future, supporting a charitable cause, or investing in your own financial security, these actions embody the true spirit of giving. If you are truly focused on securing long-term financial freedom for both yourself and your loved ones, this holiday season give a gift that will benefit you for years to come. Please contact us to get started with your estate planning and financial journey today!

From the entire team at Lane, Lane & Kelly, we wish you and your family a wonderful holiday season and a happy and healthy new year!

This blog is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By reading this blog you understand that there is no attorney client relationship between you and Lane, Lane & Kelly, LLP.

Please be advised that nothing in this article is intended to be used as specific tax advice. Lane, Lane & Kelly, LLP is not a certified Tax Specialist. For specific questions, please contact a qualified tax expert or accountant. The information in this article is intended for educational purposes only.