There are two categories of gifts, those that use the gift tax exemption and those that don’t. These use the exemption. Ideally there’s a conversation about “how” a gift is used.

The rules are straight forward. There’s a $12.92 million (in 2023) lifetime limit before a gift tax applies. For any gifts over $17,000/person, you must file Form 709, but you don’t pay taxes until you exceed $12.92 million in total. For couples the limits are effectively doubled. While it consumes the exemption, helping family members fund an HSA, IRA, 401(k), or 529 plan also defers or eliminates future taxes for them.

 HSAs are capped at $3,850 for a single and $7,750 for a couple, but not taxed when spent on medical items. It can provide financial security, so they can buy less expensive high deductible health plans.

 Funds for 401(k) plans are effectively capped at the $17,000 gift tax limit. However, the faster it grow, the faster loan capability for a medical or other emergency grows.

 529 college savings plan contributions for grandchildren can reduce unhealthy stress across two generations. It can also repay up to $10,000 of loans for a beneficiary and each sibling. These accounts don’t have annual limits, but do cap the total. (Also, you may be able to use five years of the exemption in a single year.)

 IRA’s are useful up to $6,500, if a 401(k) isn’t an option. It can be an important way to help a young adult think and learn about how far in the future they need to plan.

Each of these uses a part of the gift tax exclusion, but all provide ways to help family members fund their medical care to increase health and/or lower stress to remain healthy.