Gifting vs. Inheritance: Which is Better for Your Beneficiaries?

You can find all the details and step-by-step guidance in our free guide, “Smart Strategies for Maximizing Generational Wealth,” which you can download at www.bit.ly/max-gen-wealth. But here are a few of the key concepts to know and consider. 

The Basics of Giving Financial Gifts 

Gifting involves transferring money or assets to your beneficiaries while you're still alive. Some key points about gifting include: 

• Annual gift tax exclusion: In 2024, you can gift up to $18,000 per person per year without incurring gift taxes. Married couples can combine their exclusions to gift up to $36,000 annually to each recipient. 
• Annual gift tax exclusion: In 2025, you can gift up to $19,000 per person per year without incurring gift taxes. Married couples can combine their exclusions to gift up to $38,000 annually to each recipient. 
• Lifetime gift tax exemption: As of 2024, you can gift up to $13.61 million over your lifetime without owing federal gift tax. This exemption is shared with the estate tax exemption. 
• Lifetime gift tax exemption: As of 2025, you can gift up to $13.61 million over your lifetime without owing federal gift tax. This exemption is shared with the estate tax exemption. 
• Potential for immediate financial support: Gifting allows you to provide financial assistance to loved ones when they may need it most, like for education expenses or a down payment on a home. 

The Basics of Inheritance  

Inheritance refers to the assets you leave to beneficiaries through your will or estate plan after you pass away. Key aspects of inheritance include: 

• Estate tax considerations: In 2024, estates valued over $13.61 million may owe federal estate taxes. Some states also levy their own estate taxes. 
• Step-up in basis: Inherited assets often receive a step-up in cost basis to their fair market value at the time of death, potentially reducing capital gains taxes if the assets are later sold. 
• Control retention: You maintain control of your assets until you pass away. 

Comparing the Benefits: Gifting vs. Inheritance   

Potential Benefits of Gifting: 

1. Immediate financial impact for recipients 
2. Opportunity to see your gifts being used and enjoyed 
3. Potential estate tax savings by reducing the size of your taxable estate 
4. Ability to help shape beneficiaries' financial habits during your lifetime 

Potential Benefits of Inheritance: 

1. Retain control of assets throughout your lifetime 
2. Possible step-up in cost basis, reducing future capital gains taxes 
3. May be simpler from a record-keeping perspective 
4. Allows for changes to your estate plan over time 

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Key Considerations When Deciding Between Gifting and Inheritance  

Your Financial Security 

Before implementing a gifting strategy, ensure you have sufficient assets to maintain your desired lifestyle throughout retirement. An inheritance strategy may be preferable if you're uncertain about your long-term financial needs. 

Beneficiaries' Current Needs 

If your beneficiaries have pressing financial needs or opportunities, gifting may provide more immediate impact. However, if they're financially stable, an inheritance approach might be suitable. 

Tax Implications 

Consult with a qualified tax professional to understand how gifting or inheritance strategies may impact your overall tax situation and that of your beneficiaries. 

Asset Types 

Some assets may be better suited for gifting, while others may be more advantageous to transfer through inheritance. For example, highly appreciated assets might benefit from the step-up in basis received through inheritance. 

Family Dynamics 

Consider how gifting or inheritance strategies might impact relationships among family members. Open communication about your plans can help manage expectations and prevent potential conflicts. 

Your Desire for Control 

If maintaining control over your assets is a priority, an inheritance strategy may be preferable. Gifting requires relinquishing ownership and control of the gifted assets. 

Estate Planning Goals 

Your broader estate planning objectives, such as charitable giving or business succession planning, may influence whether gifting or inheritance is the better approach.

Implementing a Balanced Approach  

For many individuals and families, a combination of gifting and inheritance strategies may be the most effective approach. This allows you to provide some immediate financial support to beneficiaries while still retaining assets for your own needs and future requests. 

Working with a qualified financial advisor can help you develop a comprehensive strategy that aligns with your goals and maximizes the benefits for both you and your beneficiaries. They can assist in navigating complex tax rules, evaluating different scenarios, and adjusting your plan as circumstances change over time.

Finding the Right Resources to Help You Transfer Your Wealth Effectively  

A bit of research and a strong strategic financial partner are essential when creating your wealth transfer strategy. Reach out to us for a free consultation. You can schedule one on our website at whzwealth.com, or call us at (860) 928-2341. We're here to provide you with “Absolute Confidence. Unwavering Partnership. For Life.” 

Authored by Associate Vice President, Wealth Advisor Holly C. Wanegar, CFP®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084. 860-928-2341. www.whzwealth.com.