Gifting and legacy planning

Gifting is the act of transferring wealth during your lifetime. Legacy planning is the broader question of how wealth moves to the next generation — during life and at death — and what structure, guidance, and values come with it. The two are connected but not the same.

Most families who come to us have been doing some version of annual gifting on autopilot. The accountant or the attorney said to give the annual exclusion amount every year, and they have been doing it. The checks go out in December. Nobody stops to ask whether the gifts are landing in the right hands, in the right form, at the right time.

The questions that matter are upstream of the check. Does the family's estate actually exceed the exemption, or is the gifting solving a problem that does not exist? Would giving appreciating assets — shares of a business, a rental property interest, a growing stock position — move more value out of the estate than cash? Is the recipient ready for the gift, or is it creating a problem the family has not discussed?

The annual gift tax exclusion lets you give a specific dollar amount to any number of recipients each year without filing a gift tax return or using any of your lifetime exemption. The amount adjusts for inflation. A married couple can each give the exclusion amount to the same person, effectively doubling the gift.

The exclusion applies per recipient, per year. A couple with three children and six grandchildren can move a significant amount out of their estate every year using nothing but the annual exclusion. Over a decade, the cumulative transfer is meaningful — especially if the gifts are invested by the recipients and the growth happens outside the estate.

Annual exclusion gifts work best when they are part of a plan, not a reflex. For some families, the gifts should be cash to fund specific goals — a down payment, college tuition, an emergency cushion. For others, the gift should be shares of an asset that is expected to appreciate, so the growth happens in the recipient's name. The right form depends on the family's situation, not on a calendar reminder.

The lifetime gift and estate tax exemption is currently above thirteen million dollars per person. That number was set by the 2017 tax law, and it is scheduled to drop roughly in half at the end of 2025 unless Congress acts. Nobody knows whether Congress will extend it.

For families whose estates are near or above the current exemption, the window matters. Gifts made now under the current exemption are locked in — the IRS has confirmed that gifts made while the exemption is high will not be clawed back if the exemption drops later. That makes the next few years unusually important for families who have been thinking about large gifts but have not acted.

For families well below the exemption at any level, the urgency is lower. But the principle is the same — moving appreciating assets out of the estate while values are lower captures future growth outside the taxable estate. The gift does not have to be large to be useful.