You’ve Decided to Share Your Wealth with Family. Now What?
The most effective wealth transfer strategies are those tailored to the unique dynamics and circumstances of each family. Before making any gifts, it’s crucial to consider several important factors to shape your transfer plan.
To whom will you gift?
Deciding who should benefit from your generosity involves complex considerations. Should you gift to your children, their spouses or younger generations? Consider immediate needs, like a down payment, and long-term goals, such as preventing student debt. An effective strategy includes periodic reevaluations, clear communication of intentions, and guidelines for fund stewardship.
What will you gift?
There are many ways to share your wealth, including:
• Assets likely to appreciate: These holdings make ideal gifts. However, when an asset is gifted during the benefactor’s lifetime, its cost basis transfers with it. Ideally, any gift would be of high-basis assets. If you plan to gift securities from your portfolio, review the holdings on a lot-by-lot basis to optimize the tax benefits of gifting.
• Cash: Cash gifts allow recipients to purchase assets at full basis, expecting appreciation. If cash is insufficient, selling assets may trigger capital gains. Consider a portfolio line of credit to address liquidity shortfalls.
• Shares in a privately held business: Partial ownership in a family business can be an ideal asset to gift, as illiquidity or minority discounts may reduce the apparent value of the shares gifted. Gifting privately held shares can be especially effective if, upon a future liquidity event, those shares are sold at a much higher value than today.
• Real or tangible property: Consider gifting real property, like vacation homes, or tangible assets, such as art, if they are expected to appreciate. Review each account, asset, and structure on your balance sheet to maximize value when determining what asset(s) to gift.
When will you make your gift?
Some prefer to gift during their lifetimes to see how family members use it. Gifts can be made outright or through a trust. Consider the lifetime gift tax exclusion, $13.99 million per person in 2024, adjusted for inflation in 2025, and halved in 2026. Gifting now can reduce estate tax obligations and allows for observation and adjustment.
How will you make your gift?
Decide whether to give outright or delay access through a trust. Trusts offer tax benefits and protect assets from creditors. An irrevocable grantor trust lets the gift-giver pay taxes, promoting tax-free growth. Monitor the tax burden and seek expert advice before making large gifts.
Rick Barragan is the Managing Director,
Los Angeles Market Manager, for J.P. Morgan Private Bank.
[email protected] | (310) 860-3658
privatebank.jpmorgan.com/los-angeles
Source: “You’ve decided to share your wealth with family. Now what?”, by Marc E. Seaverson, CPWA, Wealth Strategist, U.S. Wealth Advisory, March 6, 2025.
