You’re listening to **Advice-Only: Financial Planning Case Studies with Quincy Hall, CFP** — where we explore the real-life decisions behind financial success.

Each episode walks through a realistic planning scenario — based on true-to-life concepts, but not individual advice. Everyone’s situation is unique, so be sure to review any strategies you hear with your own fiduciary advisor, estate planning attorney, or tax professional before making financial decisions. Alright — let’s dive into today’s story:

The Tax Trap for Generosity

Tonya and Brad, two proud parents who wanted to gift their son, Raymond, **$38,000** for a down payment in 2026. They discovered one simple signature can mean all the difference between a tax-free gift and a messy scenario that unnecessarily eats into their **lifetime exemption**.

Tonya and Brad were excited. Raymond had found his first home, and they wanted to cover the full $38,000 down payment. Tonya, ever the practical one, said, “Can’t we just wire it straight from my savings account?”

Their planner paused. “That does work, but since it’s coming from just your account, it could cause an issue,” he said gently. “If that $38,000 transfer is traced to you, the IRS may treat you as the sole donor. Since your annual limit is estimated to be $19,000 per recipient in 2026, the extra $19,000 would unnecessarily cut into your lifetime exemption.”

Brad frowned. “Wait — so we’re being penalized for helping our kid?”

“We’ll handle it differently,” the advisor replied. **“Don’t worry — you just need to use the Gift Splitting rule. It lets you and Tonya each claim half the gift — $19,000 apiece — and make the entire $38,000 completely tax-free under the gift-tax rules. To do that, you’ll both sign Form 709, telling the IRS you’ve agreed to split it.”**

Brad laughed. “Not another tax form.”

**“Yup,”** the planner smiled, **“but this one saves you from giving up a slice of your lifetime gift-and-estate tax exemption, which together is approximately $30 million for a married couple in 2026.”**

The Power of Form 709 Filing

The financial principle at work is **Gift Splitting**. It’s how married couples can combine their **Annual Gift Tax Exclusion** — estimated to be $19,000 each in 2026 — and give up to $38,000 per person per year without affecting their lifetime exemption.

**But here’s the part many miss:** even when a gift is non-taxable, **Form 709 must still be filed** whenever a gift exceeds the individual annual limit. That filing serves two purposes:

1. It satisfies the legal reporting requirement that a gift over $19,000 occurred.
2. It allows the couple to elect **Gift Splitting**, turning a required report into a **smart tax move**.

Without that form, the IRS could count the entire $38,000 as Tonya’s gift alone — meaning $19,000 would reduce her lifetime exemption.

With the form — and Brad’s signature — the entire $38,000 remains a tax-free transfer and untouched by their lifetime limits.

Once you understand the rule, it’s easy to stay compliant with a little organization.

Keep it simple: use a spreadsheet to track annual gifts. Each entry is automatically date-stamped — a small habit that makes audits or estate reviews far easier.

You’ll find a link to a free template in this episode’s description.

The moral of the story? **Filing Form 709 isn’t always required — but how you use it determines the outcome.**

When a couple gives more than $19,000 to one person, the form must be filed. But by electing Gift Splitting on that same form, Tonya and Brad turned a mandatory report into a tax-smart wealth transfer — protecting their combined $30 million dollar exclusion. They practiced efficient tax gifting and hassle-free compliance through the timely filing of Form 709.

They made sure their generosity didn’t turn into a tax trap.

You’ve been listening to **Advice-Only: Financial Planning Case Studies with Quincy Hall, CFP**. If you found this helpful, follow the show for more short, real-world examples of financial planning in action.