# When Should You Give Money to Your Heirs? The Tax and Legacy Calculation

The Great Wealth Transfer looms as Baby Boomers age and their accumulated assets pass to younger generations. But timing matters enormously. Whether you give money now or wait until death determines how much your family actually receives, and taxes play a substantial role in that equation.

Giving during your lifetime offers specific advantages. The federal gift tax exemption stands at $18,000 per person per year (for 2024). You can give this amount annually to as many people as you choose without filing paperwork or using your lifetime exemption. For married couples, that doubles to $36,000 per recipient yearly. These gifts transfer wealth outside your taxable estate, meaning they don't count against your $13.61 million federal estate tax exemption (also for 2024).

The estate tax exemption matters because it sunsets. Congress set it to drop to roughly $7 million per person in 2026 unless lawmakers act. That change affects only the wealthy, but it reshapes planning urgently. If you have substantial assets and expect taxable estates, giving now locks in today's higher exemption levels. Your gifts remove appreciation from your taxable estate too. If you give $100,000 to a child today and that asset grows to $150,000, only the $100,000 counts toward your estate tax exemption.

Waiting until death offers counterarguments. Heirs receive a "step-up in basis," meaning their cost basis for inherited assets resets to fair market value at your death. If you own stock worth $50,000 that you purchased for $10,000, and you give it away alive, the recipient inherits your $10,000 basis. They owe capital gains tax on the $40,000 gain if they sell. But if you hold the stock until death, your heirs inherit it with a $50,000 basis, eliminating the tax burden entirely. This step-up proves powerful for appreciated assets.

Investment performance also enters the equation. If your assets will likely grow substantially, giving now means that future growth escapes your estate entirely. Conversely, if you doubt strong returns ahead, giving later preserves capital while you're living and growing it.

Charitable giving introduces another layer. Donor-advised funds let you give substantial amounts this year, claim an immediate tax deduction, and distribute to charities over time. Charitable remainder trusts provide income to you while ultimately benefiting charities, reducing your taxable estate.

Your health and longevity matter too. Younger, healthier donors benefit more from gifts because assets have longer to grow outside their estates. Older donors closer to the estate tax threshold should examine current exemption levels carefully before 2026 arrives.

The right choice depends on your specific circumstances: asset type, growth potential, family size, estate size, and current tax law. Someone with $5 million in assets and appreciating real estate faces different math than someone with $2 million in stable stocks. A Kiplinger assessment tool helps clarify whether your situation favors giving now or waiting, by showing how taxes and growth play out under your specific conditions.

Run the numbers with a tax professional. The difference between optimal and suboptimal timing can mean hundreds of thousands of dollars for your family.