Gifting Highly Appreciated Assets: A Tax-Smart Strategy for Wealth Transfer- High-net-worth individuals and families often hold stocks, real estate, or other assets that have significantly increased in value over time. Selling these assets outright can trigger capital gains taxes, reducing the asset's net value. However, strategic gifting—whether to family members or charities—can minimize tax liabilities, while ensuring that wealth is transferred efficiently.
By understanding gift tax rules, charitable giving strategies and estate planning considerations, individuals can preserve more of their wealth while benefiting loved ones and the causes they care about.
Gifting highly appreciated assets offers several financial advantages:
Careful planning ensures that these benefits are fully realized while complying with tax laws and avoiding unintended financial consequences.
The IRS imposes gift tax rules on high-value asset transfers. However, several exemptions allow for tax-free gifting.
In 2025, individuals can gift up to $19,000 per recipient per year without triggering gift tax reporting. Married couples can combine their exclusions, allowing up to $38,000 per couple annually.
Gifting within these limits enables gradual wealth transfer without reducing the federal lifetime estate and gift tax exemption, which currently stands at $13.61 million per individual (subject to legislative changes).
Gifts exceeding the annual limit count toward an individual’s lifetime exemption, reducing the amount that can be passed estate-tax-free upon death. However, gifting assets while living can significantly reduce estate tax liabilities for individuals with estates exceeding the exemption amount.
Gifting appreciated assets can result in capital gains tax consequences for the recipient. Unlike assets inherited at death, which receive a step-up based on fair market value, gifted assets retain the donor’s original purchase price (basis).
For example:
For individuals concerned about minimizing tax burdens for heirs, gifting certain assets while retaining others for inheritance may be the most tax-efficient strategy.
One of the most tax-efficient ways to support a nonprofit is by donating appreciated securities directly. Doing so:
For example, donating $100,000 in appreciated stock instead of selling it and donating cash could save $20,000 or more in capital gains taxes.
A Charitable Remainder Trust (CRT) allows individuals to donate highly appreciated assets, while retaining an income stream during their lifetime. This strategy:
CRTs are ideal for those who wish to benefit from their assets while making a long-term charitable impact.
A Donor-Advised Fund (DAF) allows individuals to contribute appreciated assets, receive an immediate tax deduction and distribute funds to charities over time. DAFs provide:
DAFs are effective for individuals who want to maximize tax savings, while maintaining control over charitable donations.
Gifting appreciated assets plays a key role in estate planning, reducing taxable estate size and ensuring smooth wealth transfer. An estate planning attorney can help:
For individuals with high-value estates, integrating gifting into a broader estate plan ensures optimal tax efficiency and legacy preservation.
Gifting highly appreciated assets requires careful planning to balance tax efficiency, wealth preservation and charitable giving. Whether you are donating assets, transferring wealth to family, or incorporating gifting into your estate plan, our law firm provides skilled guidance to ensure maximum benefits with minimal tax consequences. Schedule a consultation today to explore the best strategies for your financial legacy.
Schedule your phone consultation: THE LAW OFFICES OF CLAUDE S. SMITH, III
Gifting Highly Appreciated Assets: A Tax-Smart Strategy for Wealth Transfer
Reference: Charles Schwab (December 13, 2024) “Tax-Smart Ways to Gift Highly Appreciated Assets”
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