May 2026 Financial Planning Update:
What Gifting Means Now Versus Later

Imagine a business owner in their early sixties who has spent the last thirty years building a commercial real estate portfolio.

It’s worth $3 million today.

They bought it for $400,000.

They’re proud of what they’ve built, they don’t need the income, and they’ve started wondering whether it makes more sense to gift it to their children now or simply let it pass through their estate when they’re gone.

That decision sits at the intersection of two taxes that can be mistaken for separate but are really one unified system: gift tax and estate tax.

The IRS tied the two together intentionally. Without this connection, wealthy individuals would simply gift everything away before death and sidestep the estate tax entirely.

Every individual has a single $15 million lifetime exemption that governs each.

Important to note, you don’t actually owe either tax until your cumulative lifetime gifts and/or estate exceed that threshold. However, the state-level estate tax exemption can be as low as $1 million, depending on the state you live in.

The Compounding Logic of Gifting Early

So back to our business owner and their $3 million portfolio. The case for gifting it now is real. Transfer it today, and you remove not just the current value from your taxable estate, but every dollar of future appreciation as well. If that portfolio grows to $6 million over the next twenty years, the estate tax calculation never sees that growth. For business owners and investors sitting on appreciating assets, that compounding logic is genuinely powerful.

The Capital Gains Trade-Off

But here’s what that calculation leaves out. That portfolio was purchased for $400,000, which means it carries $2.6 million of embedded capital gains.

Gift it during life, and your children inherit that tax liability along with the asset. They’ll owe capital gains tax on that $2.6 million if they eventually sell. Hold it until death, however, and the asset receives a step-up in basis to fair market value. That embedded gain disappears entirely.

In this particular scenario, the “sophisticated” move of gifting early could actually cost the family more in capital gains tax than it saves in estate tax. This is why the question is never simply “how do I move this out of my estate?” but rather “which assets make sense to transfer, and when?”

The Human Element of Wealth Transfer

There’s also the human side of this decision. Gifts are permanent. Assets moved into irrevocable structures cannot be reclaimed if circumstances change. The strategy has to be weighed against your own financial security first.

For most clients, the best starting point has nothing to do with trusts or irrevocable transfers at all. Every individual can give up to $19,000 per recipient per year with no gift tax, no exemption used, and no return required. A married couple with a few children and grandchildren can move hundreds of thousands of dollars out of their estate annually through nothing more than consistent, intentional generosity. It doesn’t require an attorney. It just requires a decision to start.

Estate Planning is for Everyone

The gift and estate tax system isn’t something reserved for the ultra-wealthy, even if the headline numbers suggest otherwise. Life insurance death benefits, retirement balances, real estate, and business interests can all count toward your taxable estate. Again, at the state level, estate taxes can apply at just $1 million or less.

The concepts here have practical implications at almost every asset level, and the decisions made, or not made, have real consequences on the net asset value you pass to your family. If you are exploring how these strategies apply to your own estate planning, having a fiduciary plan management strategy in place is essential.

Whether your estate looks more like $2 million or $20 million, being intentional about how and when wealth transfers happen is worth the conversation. I can see why John loves Estate Planning as much as he does! Any other strategy game lovers out there with us?

Until next month, Cheers!