A Guide to Gifting Assets to Your Children
You’ve worked hard to build something. Now you’re wondering: what’s the smartest way to pass it on? Whether you’re thinking about helping your kids buy a home, transferring a stake in your business, or simply starting to move wealth to the next generation, gifting can be a powerful strategy — if you understand the rules.
Here’s what every parent and business owner should know before making a move.
The Annual Exclusion: Your Free Pass
The IRS gives every U.S. citizen a gift tax “free pass” each year. In 2026, you can give up to $19,000 per person, per year, to as many people as you like — with no gift tax return required and no impact on your lifetime exemption. Married couples can combine their exclusions to give $38,000 per recipient annually.
Example: A couple with three adult children and six grandchildren could give away $342,000 per year completely tax-free through annual exclusion gifting alone.
The Lifetime Exemption: Your Bigger Lever
Beyond the annual exclusion, each person has a lifetime Gift Tax Exemption of $15 million (as of 2026). Gifts above the annual exclusion threshold reduce this lifetime exemption — but you won’t owe gift tax until you’ve used it all up.
If you do exceed your lifetime exemption and continue giving, gift tax kicks in at 40%. That’s why strategic planning matters.
Important note: This same $15 million also functions as your Estate Tax Exemption at death. It’s not a double benefit — it’s one pool of exemption you can use during life, at death, or split between both.
Timing Matters: The Step-Up Basis Question
Here’s the tricky part. When you die holding an appreciated capital asset, your heirs typically receive a “step-up in basis” to the date-of-death value — effectively erasing any built-up capital gains. That can be enormously valuable for a long-held investment or family business interest.
But if you gift that same asset during life, your heirs take on your original cost basis. If they ever sell, they’ll owe capital gains on all that appreciation.
The strategic question: Is it worth getting future appreciation out of your estate now — and locking in the lifetime exemption — or is it better to hold the asset and preserve the step-up in basis for your heirs?
There’s no universal right answer. It depends on the asset, your health, your tax situation, and how long you expect to hold it. An experienced estate planning attorney can help you model both scenarios.
Outright Gift or Trust: Which Structure Is Right?
Once you’ve decided to give, you have two basic options: give the assets outright, or give them in trust.
Outright gifts
- Give the recipient full, immediate control.
- Simple to execute.
- But: assets are exposed to the recipient’s creditors, mismanagement, potential future ex-spouses, and will be included in their taxable estate at death.
Gifts in trust
- Can protect assets from creditors, mismanagement and divorce.
- Let you control how and when distributions are made.
- Can direct assets to grandchildren or future generations, potentially skipping estate or generation skipping tax
- Requires a trustee (which cannot be you, if the goal is to keep assets out of your estate)
For most high-net-worth families, a trust structure offers significant advantages — though the right design depends on your specific goals and family dynamics.
Bottom Line
Gifting is one of the most powerful tools in estate planning — but the decisions involved are layered. The right approach depends on your assets, your family, your tax exposure, and your goals for the people you love.
The attorneys at Tuggle Duggins work with business owners and families throughout the Carolinas to structure gifting strategies that make sense for the whole picture — not just the tax return.
Ready to explore your options? Contact our estate planning team to schedule a conversation.