Understanding 2026 Gifting Restrictions

TL;DR Summary: In 2026, federal gifting rules offer both relief and a wake-up call for upper-middle-class Californians: the annual gift exclusion remains at $19,000 per donee, and the lifetime gift and estate tax exemption rises to $15 million per individual (or $30 million for married couples), but strategic planning is more important than ever for maximizing this window and avoiding pitfalls.

As you move into your “golden years” and begin thinking more deliberately about legacy, family transfers, and what you’ll leave behind (both financially and emotionally), it’s vital to have your gifting strategy aligned with current rules- not yesterday’s laws and not tomorrow’s guesses. For California residents, especially those with significant estates and adult children, the year 2026 brings both opportunity and complexity when it comes to gifting.

This blog post will help you understand 2026 gifting restrictions, with helpful gifting tips from Goff Legal’s experienced estate planning attorneys. Let’s dive in!

The Basics: Annual Gift Exclusion

Every year, the Internal Revenue Service (IRS) allows you to give a certain dollar amount to each person without reducing your lifetime exemption or triggering a gift tax. For tax year 2026, that annual gift exclusion is $19,000 per donee (unchanged from 2025). 

Here’s what that means in practical terms:

• You (as an individual) may give $19,000 in the calendar year 2026 to your adult child, your niece, your granddaughter, etc., without using any of your lifetime exemption.

• If you’re married and your spouse joins you, you can each give $19,000 to the same recipient, meaning a total of $38,000 per donee without touching the lifetime exemption.

• You can do this for as many donees as you wish (not just children) in the same year.

From a California standpoint: although California has no state gift tax (so you don’t need to worry about a separate California gift tax calculation), you do still need to consider income tax implications on asset transfers and how gifting might affect your estate value and planning overall.

2026 Lifetime Gift & Estate Tax Exemption

Perhaps the most important development for high-net-worth families is the update to the lifetime gift and estate tax exemption. Under the legislation known as the One Big Beautiful Bill Act (OBBBA), beginning January 1, 2026, the exemption amount rises to $15 million per individual, and $30 million for married couples, indexed for inflation going forward. 

Why this matters for you:

• Gifts you make above the annual exclusion ($19,000) reduce your lifetime exemption. With the higher exemption, you have more “room” to give while still preserving your estate-tax shelter for death or later transfers.

• A married couple could (in theory) give away up to $30 million in cumulative lifetime gifts (above annual exclusions) without incurring federal gift tax, and without reducing the amount they may leave at death (subject to other limitations).

• For California couples with substantial assets (such as real estate in Sacramento/Placer County, investment portfolios, family business interests), this opens strategic doors.

It’s worth noting that many planners feared the exemption would go down in 2026 when the Tax Cuts and Jobs Act (TCJA) of 2017 expired. (Some projections had it dropping to ~$7 million individual if Congress did nothing.) With this legislation, the “sunset risk” has been largely removed (at least for now) and replaced instead by a positive increase. That said, “do nothing” is rarely the best choice when legacy and family wealth transfers are involved.

What’s the “Restriction” in 2026?

The title “gifting restrictions” may sound limiting, but in fact, the message is: there are limits you can’t ignore, and if you wait too long, you may miss out or misstep. Here are key caveats:

• Using the annual exclusion is “use it or lose it”: The $19,000 per person per year does not roll over. If you don’t make gifts up to that amount to each donee this year, that portion of “free” transfer opportunity is gone for the calendar year.

• Filing requirements kick in when you exceed the annual exclusion: If you give more than $19,000 to any one person in 2026, you’ll likely need to file IRS Form 709 (Gift Tax Return) to track how much of your lifetime exemption you’ve used. That’s especially important when you’re doing larger gifting (e.g., real estate, business interests).

• California issues still matter: While California doesn’t have its own gift tax, gifting real property may trigger reassessment under California Proposition 19, capital gains issues, or change the structure of your estate. Be sure your gifting strategy considers both federal and state-specific issues.

• Asset value freezes matter: Gifting assets now (especially those likely to appreciate such as California real estate, investments, business interests) can “freeze” the value of that asset for transfer-tax purposes. The larger the growth post-gift, the more you’ve shifted future appreciation outside of your estate. This can be powerful, but it must be done thoughtfully.

• The window for action matters: Even though the lifetime exemption is now $15 million, the rules (filing obligations, valuation rules, family dynamics) still require advance planning. For example, if you plan to gift business interests or transfer real estate into a trust and then gift trust interests, those kinds of transactions take time.

Strategic Gifting Tips for Californians

Here are six smart gifting tips for California couples or individuals who want to take advantage of gifting opportunities:

1. Max out annual exclusions each year: Even if your estate is well under the $15 million mark, giving $19,000 (or $38,000 for a married couple) to each adult child or grandchild annually reduces your estate and strengthens your legacy.

2. Consider accelerated gifting of appreciating assets: If you own investment real estate, business interests, or assets likely to appreciate, giving part of them now may shift future appreciation out of your taxable estate. But make sure you’re comfortable with surrendering control or income from the asset or making arrangements (e.g., retaining a lifetime income interest).

3. Pay tuition and medical expenses directly: Gifts made directly to educational institutions or medical providers for someone else’s benefit do not count against your annual exclusion. These “free‐pass” transfers are excellent for legacy families.

4. Use trusts strategically: For example, you might fund an irrevocable trust for an adult child or a special needs beneficiary and make annual exclusion gifts into that trust. This helps shift wealth, impose control over how the money is used, and keep it outside your taxable estate.

5. Coordinate with your estate-planning attorney: Because you’re in California and possibly holding significant real estate or business interests in Sacramento/Placer counties, you’ll want to integrate gifting strategy with your estate plan approach so that the gift doesn’t inadvertently disrupt your estate plan or trigger other tax consequences.

6. Document and monitor carefully: If gifts exceed the annual exclusion, make sure you file Form 709; keep track of how much of your lifetime exemption you’ve used; review your gifting activity annually; ensure that your estate planning documents reflect the gifting strategy (e.g., does your trust anticipate lifetime gifts? Does your successor trustee know about the gifting strategy?).

Mistakes to Avoid

Here are common pitfalls for people in your demographic:

• Thinking “no need to do anything until I’m gone.” Gifting while alive allows you to see the benefit, help your adult children now, and ensure things are handled smoothly.

• Ignoring valuation issues. For example, gifting a fractional interest in real property or a business interest often triggers IRS valuation scrutiny, and undervaluing is risky.

• Forgetting the impact on control and income. If you gift an asset that currently produces income (like an investment property or stock portfolio), you need to consider whether you want to continue receiving that income or whether the donee becomes the owner.

• Not coordinating with trust/estate documents. If your estate plan expects to leave certain assets to trust or skip gifts, unplanned lifetime gifts may disrupt your desired structure, beneficiary designations, or trust funding approach.

• Failing to consider future changes. Although the exemption is now $15 million, that doesn’t mean it will never change. Tax law could shift, and gifting strategies need to be revisited regularly as family circumstances and law change.

What This Means for Your Legacy & Family Dynamics

For many of our clients at Goff Legal, the question isn’t simply “how much can I gift?” but “how can I use gifting to advance my family’s values, support my children/grandchildren, protect my legacy, and keep control where I want it?” Here’s how you might think about it:

• You might give annual exclusion gifts now so that your adult children have financial breathing room, or use the gifts to help fund a grandchild’s wedding or advanced education.

• You might place portions of your portfolio into a trust for future generations (e.g., grandchildren trust) and use annual exclusion gifts to fund it over time, rather than wait until you’re gone.

• You might freeze the value of your real estate now, gifting a fractional interest into a family limited partnership (or other vehicle) and thereby reducing future estate tax exposure while retaining income.

• You might use gifting to shift assets into younger generations, while retaining lifetime income or use, thereby preserving your standard of living and long-term security.

• You might integrate charitable gifting (or donor-advised funds) and annual exclusion gifts in your plan so that both family and philanthropy benefit.

Because you’ve built your estate in California (where real estate values, especially in the Sacramento/Placer region, often appreciate strongly), acting now to shift some of that growth out of your estate (with appropriate legal and tax guidance) can be a wise move.

How Goff Legal Can Help You

At Goff Legal, our experienced estate planning attorneys focus on estate planning for clients exactly like you: middle to upper-middle-class Californians over 60, many of whom are widows or divorced and want to ensure their estate plan reflects their values, supports their children (or non-children heirs), uses smarter gifting, and avoids family disputes later.

We can help you:

• Assess how the 2026 rules apply to your situation (your estate size, asset mix, California real estate, children/no children, adult stepchildren)

• Map out a gifting strategy: which assets to gift, which recipients, timing, annual exclusion usage, trust vehicles

• Coordinate with your tax advisors and investment advisors to align valuations, gifting, income flows, and estate plan

• Update your trust, will, powers of attorney, and beneficiary designations, so lifetime gifts and death-time distributions work seamlessly together

• Document everything properly, including educating your successor trustee and adult children about the gifting strategy.

Ready to take the next step? Contact Goff Legal today for a free discovery call. We’ll review your estate plan and gifting goals, identify opportunities under the 2026 gifting rules, and help you start building that legacy-focused strategy.

FAQs

Here are five frequently asked questions that didn’t get full treatment above:

Can I gift more than $19,000 per recipient in 2026 without paying tax?

Yes, but if you gift more than $19,000 to a recipient, you will need to file Form 709 to report it. The excess amount will reduce your lifetime exemption ($15 million in 2026), but you generally won’t owe gift tax unless you exceed your lifetime exemption or other rules apply.

Do gifts between spouses in California count toward the annual exclusion or lifetime exemption?

Gifts to a U.S. citizen spouse are typically unlimited and do not count toward your annual exclusion or lifetime exemption. However, gifts to a non-U.S. citizen spouse have a higher but limited annual exclusion (which in 2026 is reported to increase to $194,000) per the IRS.

If I give an asset now and later it appreciates, will the appreciation be taxed when my estate is settled?

If you’ve completed the gift (you transfer the asset), future appreciation generally is outside of your estate (which is the benefit of the strategy). But you should be mindful of any retained interest, income rights, or state tax issues. Also, if the donee later sells, they may owe capital gains tax based on the original donor’s basis, so consider tax and income-flow implications.

Does California have its own separate gift tax I must worry about?

No. California (as of this writing) does not impose a separate state gift tax. But gifting can trigger other California consequences (property-tax reassessment under Proposition 19 if you transfer real estate, or income tax issues for the recipient). 

Should I wait until after 2026 to gift because the exemption increases?

While the lifetime exemption in 2026 is $15 million (an increase), the annual exclusion stays the same ($19,000). If you delay, you lose years of annual exclusions you could have used. Also, gift-planning often benefits from transferring now if assets are likely to grow in value. The best choice depends on your asset mix, family goals, tax situation, and how comfortable you are with giving now. A tailored strategy is best.