Gifting is one of the most powerful tools in your financial planning toolbox. Done thoughtfully, it can help you reduce your taxable estate, avoid unnecessary capital gains, and support loved ones or charitable causes that matter to you.
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The One Big Beautiful Bill Act (OBBBA), passed on July 4, 2025, makes strategic gifting even more relevant. Several key provisions in the legislation affect how and when you might choose to transfer wealth. This blog explores those changes and outlines strategies to reduce tax exposure while maximizing impact.
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Why gifting matters now more than ever
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The OBBBA increased the federal estate tax exemption to $15 million per person starting in 2026, indexed for inflation using 2025 as the base year. That might seem like ample room for many families, but if you add up the value of a primary residence, investment accounts, retirement savings, and life insurance proceeds, you may be closer to the limit than you think.
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You can remove their future appreciation from your estate by gifting assets today. That means your family or favorite causes receive the full benefit, not the IRS.
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Take advantage of the expanded lifetime exemption
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The lifetime gift and estate tax exemption is $13.99 million per person in 2025, up from $13.61 million in 2024. For the rest of the year, this amount is still governed by pre-OBBBA rules. In 2026, it will jump to $15 million under the OBBBA, with future increases indexed for inflation.
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If you anticipate your estate exceeding these thresholds, consider using part of your exemption now. Gifts made before death reduce the exemption amount available but remove future appreciation from your estate entirely.
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Use annual exclusion gifts for tax-free transfers
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For 2025, you can give $19,000 per recipient without reducing your lifetime exemption. That amount is per donor, per recipient. A married couple can jointly give $38,000 to each child, grandchild, or friend without touching their lifetime exemption.
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Over time, these small gifts can significantly reduce your taxable estate while helping loved ones when they need it most.
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One way to leverage the annual exclusion is to establish a pattern of yearly gifts. For example, over ten years, a couple with three children could transfer over a million dollars completely gift-tax free. It’s a simple, powerful way to build financial support over time.
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Gift highly appreciated assets
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One effective strategy is to gift assets with significant appreciation. When you give appreciated stock or property, you transfer your cost basis along with the asset. If the recipient is in a lower tax bracket, the capital gains may be taxed at a lower rate.
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Charitable organizations are exempt from capital gains entirely. Gifting appreciated stock directly to a nonprofit avoids tax on the gain while generating a potential charitable deduction.
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This strategy works particularly well for donors who hold highly appreciated securities and face significant unrealized capital gains. By donating the assets instead of selling them, you avoid the tax and possibly receive a deduction equal to the asset’s fair market value.
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Support family goals without triggering tax
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You can pay an unlimited amount directly to educational institutions or medical providers on behalf of someone else without using your gift exemption.
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These payments must be made directly to the institution or provider to qualify. Writing a check to a grandchild for tuition does not count. Paying the school directly does.
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This can be an excellent way to help with college tuition, private school expenses, or medical bills without worrying about the annual exclusion limit. For families with multiple grandchildren or loved ones facing rising education or healthcare costs, this technique is an elegant way to provide support tax-efficiently.
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Consider using a donor-advised fund (DAF)
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A donor-advised fund allows you to make a charitable contribution today, take an immediate income tax deduction, and recommend grants to charities over time.
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This can be particularly helpful in high-income years, like after a large bonus, business sale, or traditional IRA conversion to a Roth IRA.
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DAFs are a helpful vehicle for organizing your charitable giving. Instead of writing multiple checks each year, you can centralize your philanthropy while still retaining influence over where your contributions go.
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Think strategically about timing
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Many families give gifts late in life or at death, but earlier gifting can have significant advantages. For example, if you gift shares in a family business to your children now, future growth happens outside your estate.
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Earlier gifts also let you witness the impact of your generosity. That emotional return can be just as meaningful as the tax savings.
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Strategic timing also matters when gifting assets that may be undervalued due to market conditions or temporary declines. Giving during a market dip means you transfer assets with higher future appreciation potential, magnifying the long-term tax benefits.
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Trusts can amplify your gifting strategy
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Trusts, particularly irrevocable ones, can help you structure gifts to provide long-term benefits. A properly drafted irrevocable trust can hold life insurance, marketable securities, or real estate and remove them from your estate.
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Dynasty trusts, which can last for generations, are especially powerful under the OBBBA because the generation-skipping transfer (GST) tax exemption is also increased to $15 million starting in 2026. This allows you to pass wealth through multiple generations with minimal tax friction.
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Spousal lifetime access trusts (SLATs), intentionally defective grantor trusts (IDGTs), and grantor retained annuity trusts (GRATs) are additional structures worth exploring. Each provides unique tax advantages and control features, particularly for larger estates or complex family dynamics.
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Charitable Remainder Trusts (CRTs) can be an effective strategy for those looking to support charitable causes while also benefiting from tax deductions. CRTs allow you to make a significant gift to charity while retaining an income stream for yourself or your beneficiaries during the trust term.
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Work with a professional to avoid pitfalls
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Gift tax reporting can be complex. Even if a gift falls below the annual exclusion, tracking and proper documentation are essential. If you exceed the exclusion, Form 709 must be filed.
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A qualified financial advisor or estate planning attorney can help you assess which assets to gift, in what amounts, and through what vehicles. They can also coordinate your gifting plan with your overall estate and tax strategy, particularly in light of the new rules under the OBBBA.
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Professionals can also help evaluate state-level gift and estate tax implications. Not all states conform to federal thresholds, and some impose reporting and tax requirements. Proper coordination is essential to avoid surprises.
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Final thoughts
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Gifting is about more than taxes. It is about values, legacy, and impact. Done strategically, it can be a highly effective way to reduce your tax burden.
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The new rules under the OBBBA have made this an especially important time to revisit your gifting strategy. Whether you are supporting your children, funding a favorite cause, or laying the groundwork for multigenerational wealth transfer, innovative and tax-efficient ways exist.

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