Your parents spent decades working, saving, and investing. Now they're comfortably retired, their house is paid off, and they may have more money than they'll ever need.
So, should they start giving some of it away?
For affluent families, lifetime gifting can offer meaningful financial and tax advantages. But giving away wealth isn't always better than leaving an inheritance. Depending on the assets involved, it could actually create a larger tax bill.
The key is understanding when giving makes financial sense and when waiting might be the smarter move.
First, How Much Do Your Parents Really Need?
A retirement portfolio that looks more than sufficient at 75 might face very different demands at 90. Long-term care, healthcare expenses, inflation, and the needs of a surviving spouse can change the picture considerably.
Before making substantial gifts, it's worth identifying how much your parents need to maintain their lifestyle, how much should be reserved for unexpected expenses, and how much they're unlikely to spend even under less favorable circumstances.
That last category may present opportunities for lifetime gifting. Of course, financial security isn't just about numbers. Your parents might have more money than they'll ever spend and still feel uncomfortable giving it away. Their feelings around gifting deserve consideration, too.
Why Giving Money Away Could Actually Increase Taxes
One of the biggest considerations is the difference between gifting an appreciated investment and leaving it as an inheritance.
Let's say your mother purchased stock for $100,000 that's now worth $500,000. If she gives you the stock today, you generally inherit her original $100,000 cost basis. Selling it for $500,000 could trigger capital gains taxes on $400,000.
But if you inherit that stock after her death, its cost basis is generally adjusted to its fair market value at that time. Selling it shortly afterward could result in little or no capital gains tax.
That's why gifting cash or investments with relatively little appreciation may make more sense than transferring highly appreciated assets. However, for families facing substantial estate taxes, removing future investment growth from the estate could outweigh the capital gains disadvantage.
Estate Taxes May Not Be the Problem You Think
Many families assume they need to give money away to avoid estate taxes. But that's not necessarily the case. In 2026, the federal estate and gift tax exemption is $15 million per person, or potentially $30 million for a married couple with appropriate planning. Preserving the full combined exemption may require filing a timely estate tax return and making a portability election after the first spouse dies.
For many affluent families, federal estate taxes won't be an issue, although some states impose their own estate or inheritance taxes with lower exemptions. This creates an important planning distinction: If your parents' estate is likely to exceed applicable exemptions, lifetime gifting could help reduce future estate taxes. If their estate falls below those thresholds, keeping appreciated assets until death may offer greater tax benefits.
The goal isn't just to reduce the size of the estate; it's to understand which strategy could result in the lowest overall tax burden.
The Goal Isn't to Die with the Smallest Estate
Just because your parents can afford to give money away doesn't necessarily mean they should. The smartest approach may involve gifting certain assets now, preserving others for inheritance, and making sure your parents maintain the financial independence they've worked so hard to achieve.
Ultimately, the conversation should be about more than taxes and estate values. It's about understanding what your parents want their wealth to accomplish, both during their lifetime and after they're gone.
At C. Beach Brown, we help families make thoughtful financial decisions across generations. Whether your parents are considering lifetime gifts or you're preparing for a future inheritance, we can help you evaluate the opportunities, tax implications, and long-term financial considerations.
Let's talk about making your family's wealth work for the generations ahead.