And if your gifts are less than $15,000 per year, you don’t even have to report it. So the vast majority of gifts are not supposed to be taxed or reported.
He'll owe taxes upon withdrawal in the future, 17 years from now at the earliest, but he'll also have full freedom to use the money any way he sees fit. So school, starting a business, buying a house or letting the investment ride until retirement.
It's a risk if the kid doesn't end up going to college; you end up paying, I think, regular taxes on the earnings plus like 10% penalty.
Still, 17 years of tax free growth would be a pretty good reward if the kid does go to school.
So I can give my son $14k, my wife can give my son $14k, and we can both given my daughter a combined $28k all without even registering against the $5 million lifetime exclusion or paying any gift taxes. And couples can do that every single year for decades, which adds up to millions even without touching the exclusion.
Importantly, per person receiving. In principle you have a virtually infinite tax-free gift giving exception available if you distribute your assets to enough people.