Why More Families Are Choosing to Gift Wealth Earlier – and
How to Do It
Estate management isn’t just about what happens after you’re gone— it’s also about
what you can do now to help manage future estate taxes, transfer wealth strategically,
and attempt to create a meaningful impact during your lifetime.
Many families recognize that intentional lifetime gifting isn’t simply generous; it may also
be a smart approach to transferring your assets. If you’re in a position to support your
own retirement needs, lifetime gifting can be a way to manage future taxes while
helping your loved ones during your lifetime, when support may be most useful. And
unlike traditional inheritance, you’re able to experience the impact of your generosity.
After working with clients on their gifting and estate strategies over the years, we’ve
pulled together some insights we hope you find helpful.
The “Great Wealth Transfer”
The topic of gifting assets is timely because America is undergoing the greatest wealth
transfer in history.
According to Cerulli Associates, a wealth management research firm, $124 trillion of
wealth will transfer among generations through 2048.1
Cerulli projects that of the total, $105 trillion is expected to flow to heirs and $18 trillion
to charities. The bulk (81%) will be transferred primarily from Baby Boomers (born
between 1946 and 1964).1
Millennials (born between 1981 and 1996) will be inheriting the most of any generation
over the next 25 years ($46 trillion). However, Gen X (born between 1965 and 1980) will
inherit the greatest portion of assets in the next 10 years, totaling $14 trillion.1
So, determining how to transfer these assets may be a discussion you want to start
having now.
Shift in Gifting Philosophy
Legacy gifting after death has long been the most popular way households have
distributed their wealth. Today, however, a growing number are opting for lifetime or
intentional gifting — passing along money in a deliberate way while still alive.2
The rise in intentional gifting may be attributed to several factors, including a desire to
help family during one’s lifetime, a greater understanding of taxation and lifetime gifting
limits, and the prevalence of gifting choices.2
Benefits of Lifetime Giving
There are pros and cons to gifting assets during your lifetime. Here are some of the
tradeoffs we’ve seen when working with our clients:
- Manage the size of your taxable estate
A potential benefit of financial gifting during your lifetime is managing the size of
your taxable estate. However, it also removes the money from your control and
transfers it to others, which can be a concern for some.For 2025, the IRS allows individuals to gift up to $19,000 ($38,000 for married
couples) per year without being a taxable event for the recipient. There is no limit
on the number of individuals you can gift. For example, a married couple with two
children and five grandchildren can transfer up to $266,000 annually.2,3In addition, for those with sizable assets, the IRS allows individuals to gift up to
$13.99 million ($27.98 million for married couples) to their heirs under the lifetime
gift and federal estate tax exclusion.Managing the size of your estate may help limit your exposure to federal and
(some) state estate or inheritance taxes. Although some states, such as Florida
and Texas, impose no estate or inheritance tax, others, like Massachusetts,
Oregon, and New York, levy their own estate taxes. For some families, state-level
taxes can take a bite out of the inheritance left to loved ones.By managing your estate, you may be able to preserve more of your hard-earned
wealth for your family while keeping an eye on taxes at both the federal and state
levels. - Experiencing the fulfillment of gifting to charity
If you want to see your assets at work, you may choose to give to your favorite
charity while you are alive instead of (or in addition to) making a philanthropic
bequest part of your estate intentions.2Not only can giving to a qualified charitable organization help you manage your
taxable estate, but you may also see some tax benefits.2We provide these insights for informational purposes only. They are not a
replacement for real-life advice. We would encourage you to consult your tax, legal,
and accounting professionals before modifying your gifting strategy. As financial
professionals, we can show you the benefits and limitations of gifting to charity, or
help you as you work with your tax professional.Donor-advised funds are becoming increasingly popular among affluent families who
wish to engage in charitable giving. These professionally managed funds allow
individuals to make irrevocable contributions (meaning once they are given, they
can’t be taken back) of cash, securities, or appreciated assets. The donor may be
able to claim a tax deduction in the year the donation is made and then make grants
to a charity of their choice in the future.2Some donor-advised funds are considered mutual funds and are sold only by
prospectus. The prospectus will provide information on charges, risks, expenses,
and investment objectives and should be reviewed carefully before investing. Investment companies can provide a prospectus, or you may prefer to ask your financial professional. Please read it carefully before you invest or send money.Current federal tax law lets donors take immediate federal income tax deductions of
up to 60% of their adjusted gross income for cash donations and 30% for
appreciated assets.3 - You are around to enjoy it
Watching your loved ones use the inheritance you’ve spent a lifetime building can be
extremely gratifying. We’ve seen parents and grandparents help their families start
businesses, pay for education, and take annual vacations.With the increasing cost of home ownership and higher mortgage rates, some clients
are giving the gift of homeownership that has become out of reach for many younger
Americans. - An opportunity to share your values and provide financial education
Being financially successful, you may want to help teach your heirs to be responsible
with the inheritance they receive. Gifting during your lifetime gives you a unique
opportunity to discuss how you obtained your wealth and reinforce your values about
money, the meaning of wealth, and your philosophy about giving back to your
community and the larger world. - Build stronger family bonds today and help manage potential
disagreements after you’re gone
Gifting to family may allow you to strengthen your relationships as you age by
providing financial support during critical stages in their lives, from college to
weddings to buying a home to starting a business.The flexibility of lifetime giving allows you to structure gifts in a way that aligns with
your intentions and your loved ones’ needs.Intentional gifting can also help manage problems later on.Family infighting about money happens more than you might think after a parent
passes away. With emotions running high, even the closest family may have
disagreements, resulting in long-lasting hard feelings, especially when the parents’
final wishes are subject to interpretation.Instead of leaving family members (and possibly the probate court) to decide how
best to distribute your estate, you may be able to prevent some sibling squabbles by
passing assets along while you’re around to direct how your wealth is distributed.
Using Financial Instruments for Gifting
We’ve already mentioned a few tips for crafting a gifting strategy, like starting with open
and honest dialogue with all parties and working with professionals to navigate financial,
tax, and estate considerations. Based on your family’s situation, you may also want to
think about using appropriate financial instruments, including trusts and 529s, to help
structure your gifting.
Trusts
Beyond outright gifting of assets, depending on your circumstances and preferences,
you may want to consider setting up a trust during your lifetime. There are several types
of trusts:3
- Irrevocable Trusts allow a donor to gift assets into the trust to benefit their heirs,
who can use the assets while the donor is alive. Since the donor no longer owns
the assets, the trust can be designed to exclude the assets from that donor’s
estate. The trust may shield assets from probate, creditors, bankruptcy, and a
beneficiary’s potential divorce. - Grantor Retained Annuity Trusts (GRAT) let individuals move assets out of
their estate while still allowing them to access holdings while alive. The donor
receives fixed payments on the transferred assets for a set number of years.
What assets are left after the term is distributed to the trust’s beneficiaries aren’t
included in the donor’s taxable estate. - Spousal Limited Access Trusts (SLATs) may offer married couples a way to
take advantage of the lifetime gift and federal estate tax exclusion. The donor
makes a gift to the trust, and the assets are removed from the taxable estate, but
a spouse may receive funds during their lifetime. This can be a strategy for those
concerned about permanently gifting away too much of their wealth. - Charitable Remainder Trusts allow the donor to receive income from the trust
for a set amount of time, and the assets remaining at the end of the term are
distributed to the donor’s preferred charities. The donor receives a charitable
deduction, and upon their death, the value of the remaining interest in going to
charity is excluded from their estate.
Using a trust involves a complex set of tax rules and regulations. Before moving forward
with a trust, consider working with a professional familiar with the relevant rules and
regulations. As financial professionals, we can help you structure this type of
conversation with other professionals.
529 Accounts
For grandparents and relatives looking to make a difference during their lifetimes, giving
the gift of a college education can be a contribution they can make to a child’s future.
All 529s have an account owner and a beneficiary. The account owner controls the
account.
With an Individual 529, the most common type, an adult, usually a parent or
grandparent, is the account owner, and the child or grandchild is the beneficiary.6
With a Custodial 529, the account must be managed by a custodian, typically a parent
or grandparent, until the student reaches the age of majority in their state, when they
can control the account.5,6
Here is a brief overview of what you need to know about gifting to a 529:5
- How to give to a 529: Relatives have several options to contribute to a 529.
They can directly contribute to an existing 529 set up by the parent. Most 529s
allow friends and family to contribute directly to an existing account. Many states
make this easy by offering online gifting portals. Relatives can also open their
own 529 account for a child. This allows them to control the funds and ensure
they are properly used. - Gift tax rules and contribution limits: For 2025, grandparents or other relatives
could contribute up to $19,000 ($38,000 per couple) to each grandchild’s 529 in a
year without triggering the need to file a gift tax return. - Super-funding a 529: For those looking to make a larger contribution, the IRS
allows an individual to contribute up to five times the annual gift tax exclusion
($95,000 in 2025) in a lump sum and then spread the amount over five years for
tax purposes. Taking advantage of this strategy can quickly and significantly
impact the child’s education savings. - Financial aid considerations: If financial aid is a concern, 529s owned by
relatives can be treated more favorably in financial aid calculations than those
owned by the parent. Parent-owned 529s are considered parental assets and
have a low impact on financial aid, while a grandparent’s or other relative’s
owned 529 plan is not counted as an asset on the FAFSA and doesn’t affect aid
eligibility. - 529 rules to consider: A 529 plan is a tax-advantaged college savings plan.
Before choosing a plan, it’s important to consider not only the state tax treatment
but also any associated fees and expenses. Availability of a state tax deduction
will depend on your state of residence, as state tax laws and treatment may vary
from federal tax laws. If you make nonqualified distributions, earnings will be
subject to income tax and a 10% federal penalty tax.
Potential Pitfalls and Misunderstandings
While lifetime gifting has become more attractive to people for personal and financial
reasons, there are some factors you should keep in mind.
Over-Gifting Risks
Before embarking on an intentional gifting strategy, consider working with a financial
professional who can help you evaluate whether you might be compromising your
personal finances by giving beyond your means.
For many clients, the adage “you can’t take it with you” applies. They have accumulated
enough wealth to maintain their lifestyles, whether short or long, throughout their
retirement years.
Of course, there are stories of parents giving to their children without managing what
they set aside for themselves. In these cases, the gift is usually to solve a short-term
problem, not part of a long-term strategy. By spending down their assets too quickly,
these parents may become financially dependent on their children in the long run.4
Remember what you are told on every flight – “Make sure your own mask is on tight
before helping others.” The same applies to gifting.
Lack of Clear Communications
You should clearly articulate your intentions behind gifting your estate early to address
the potential for misunderstandings or conflicts when expectations are not met.
If you are considering unequal treatment among your children, you may want to discuss
with them the importance of fairness and transparency to prevent familial discord.
You may have valid reasons for different gifts. Some children may prefer to wait for their
inheritance, while others could benefit financially from receiving the assets today.
Every family is different, and perceptions of fairness can vary. Open conversations with
your children may help longer-term resentment or worse. While the decision on how to
divide your estate is yours, getting input upfront can help clarify expectations and
provide insight into the impact of your giving on your children’s well-being and future
relationship with you and each other.
Tax Implications
We’ve discussed the potential tax benefits of lifetime gifting, but the rules can be
complex. Keep in mind that:
- Gift tax returns may be required even when no taxes are due.
- Using your lifetime exclusion reduces what remains for estate-tax purposes.
- State rules vary—some states impose separate gift taxes or have different
definitions of taxable gifts. - Professional advice is crucial to avoid unintended tax consequences.
Conclusion
Lifetime gifting offers a powerful way to manage taxes, support loved ones, and
strengthen family relationships while you’re still around to enjoy the benefits of your generosity.
By planning thoughtfully—and working with qualified professionals—you can make gifts
that align with your financial situation, personal values, and legacy goals.
Ready to explore lifetime gifting? Reach out to your estate planning or wealth management
advisor to discuss strategies that suit your needs.
Sources
- Cerulli Associates, “The Great Wealth Transfer,” December 5, 2024.
- https://www.cerulli.com/press-releases/cerulli-anticipates-124-trillion-in-wealth-will-transfer-through-2048
- MassMutual, “Lifetime Gifting Insights,” March 18, 2024.
- https://blog.massmutual.com/planning/lifetime-gifting
- Fidelity, “Gift and Estate Tax Exclusion Amounts,” January 1, 2025.
- https://www.fidelity.com/viewpoints/wealth-management/insights/lifetime-gift-and-estate-tax-exclusions
- Merrill Lynch, “Should You Give Your Kids an Early Inheritance?” May 2025.
- https://www.merrilledge.com/article/should-you-give-your-kids-an-early-inheritance
- The College Investor, “How to Gift Money to a 529 Plan,” April 4, 2025.
- https://thecollegeinvestor.com/55020/how-to-gift-money-to-a-529-plan/
- Saving For College, “Custodial vs Individual 529 Plans,” December 30, 2024.
- https://www.savingforcollege.com/article/whats-the-difference-between-custodial-and-individual-529-plans
