The holidays are the season for giving, so it is the appropriate time to consider the advantages of gifting during your lifetime rather than passing assets to your family upon your death. Lifetime gifts can help manage income taxes, support family members when they need it most, and allow you to witness the impact of your generosity.
The Many Advantages of Lifetime Gifting
Supporting the People You Care About
One of the most meaningful reasons to give during your lifetime is the opportunity to help family members when it matters most. Financial support can make a significant difference during major life events, such as buying a first home, paying for education, starting a business, or navigating unexpected challenges. Giving today allows you to see the impact of your support and strengthen family relationships across generations.
How the Gift and Estate Tax Rules Work
The IRS considers a “gift” to be any transfer of money or property for less than fair market value. This includes cash, securities, real estate, vehicles, or forgiven loans.
Every individual has a lifetime gift and estate tax exemption, which represents the amount you can give during life or leave at death before federal taxes may apply. For 2025, the exemption is $13.99 million per individual (or $27.98 million for married couples). This amount will increase to $15 million per individual in 2026.
In addition, the annual gift tax exclusion allows individuals to give up to $19,000 per recipient without using any of their lifetime exemption. Married couples can combine their exclusions to give $38,000 per person per year, enabling families to transfer meaningful wealth over time.
Families with many children, grandchildren, or loved ones often use the annual exclusion to gradually move assets out of their estate in a tax-efficient way. You can also make direct payments for tuition or medical expenses, which do not count as gifts and do not use any exemption.
Transferring Growth Out of Your Estate
A key benefit of lifetime gifting is the ability to shift future growth to the next generation. When you gift assets, such as stocks, real estate, or closely held business interests, any future appreciation occurs outside your taxable estate.
For example, if you give $1 million of stock today and it later grows to $2 million, all that future appreciation occurs outside of your taxable estate. If you were to keep the stock until death, both the original value and the additional $1 million of growth would be included in your estate for tax purposes.
Income Tax Considerations
Family Gifting:
Lifetime gifting can also create income tax planning opportunities, particularly when the gift involves appreciated investments. For example, transferring stocks or other appreciated assets to family members who are in lower income tax brackets may allow future gains to be taxed at more favorable rates when the assets are eventually sold. This can be a thoughtful way to reduce a family’s overall tax burden while helping the next generation build long-term wealth.
It is also important to understand how cost basis works when gifting. Assets given during your lifetime retain your original cost basis, which means the recipient may owe capital gains tax on the appreciation if they choose to sell. By contrast, assets that pass at death generally receive a step-up in basis, eliminating the unrealized gain at that time. Being aware of these differences can help you decide which assets are appropriate for lifetime gifts and which to hold on to for the longer term.
When gifting appreciated stock to children, it is important to consider the kiddie tax. While transferring assets to a child in a lower tax bracket can reduce capital gains taxes, unearned income above a certain threshold, such as dividends, interest, or realized gains, is taxed at the parents’ marginal rate. This can reduce or eliminate the intended tax advantage. Understanding how the kiddie tax works can help determine which family members are best suited to receive appreciated assets and realize gains in the most tax-efficient manner.
Gifts to Charity:
Charitable giving operates under a different set of rules and can be a valuable part of your broader tax and legacy strategy. Donating highly appreciated securities directly to a charity, donor-advised fund, or charitable trust can eliminate capital gains tax on the appreciation and may provide an income tax deduction, depending on your circumstances. This approach allows you to support causes that are meaningful to you while also achieving tax efficiency.
Gifts to charities should be considered separately from family gifting, as the goals, tax treatment, and planning strategies often differ. Your advisor can help determine how charitable giving may complement your overall financial and estate plan.
The Emotional Rewards of Giving
Beyond the financial benefits, lifetime gifting offers something immeasurable: the joy of seeing your generosity support the next generation. Whether it allows a grandchild to graduate without debt or helps a family member find stability during a critical moment, giving can bring deep personal satisfaction. It also creates opportunities to share your values and strengthen family bonds.
The Bottom Line
Lifetime gifting can be a powerful way to support loved ones while also managing your long-term financial and estate planning goals. Because every family’s situation is unique, decisions around gifting should be made in collaboration with your Crestwood team, estate planning attorney, and tax professional.
Reach Out to Crestwood
We help clients and their families make sound decisions for the future, including developing a strategy for gifting. If you are not yet a Crestwood client, please contact us to see how we can help you and your loved ones realize their dreams
