Worried About a Taxable Estate? Gifting Appreciated Stock May Be Your Hidden Gem
If you’re approaching (or exceeding) the federal estate tax threshold (currently $13.99 million per person in 2025), it’s time to get strategic. One powerful move? Gifting appreciated stock to your children or grandchildren while you're still alive.
Yes, giving stock may sound like something your parents did in the 80s, but it’s a savvy, modern way to reduce your taxable estate and pass wealth more efficiently, especially if you’re already charitably inclined or want to start moving assets downstream.
Why Consider Gifting Appreciated Stock?
When you gift stock to a loved one:
You remove the value of the stock from your estate, reducing potential estate taxes down the line.
You avoid capital gains tax on the appreciation of that stock.
The recipient gets the stock at your original cost basis; if they’re in a lower tax bracket, their capital gains tax may be significantly lower than yours when they eventually sell.
Let’s Talk Limits
In 2025, the annual gift exclusion is $19,000 per recipient ($38,000 per couple). That means you can gift up to that amount in appreciated stock to each child, grandchild, or other individual without touching your lifetime exemption or filing a gift tax return. Multiply that across several family members and several years, and you’ve got a meaningful shift in wealth.
What If the Beneficiary Is a Minor?
If you're gifting stock to a child or grandchild under 18 (or 21, depending on the state), consider using a UTMA (Uniform Transfers to Minors Act) account. It allows you to transfer assets to a minor while retaining some control as custodian until they reach the age of majority.
But Before You Start Hitting “Transfer”… Know the Risks
No good tax strategy comes without trade-offs. Here are a few to consider:
Kiddie Tax: If your child is under 19 (or under 24 and a full-time student), their unearned income above $2,600 in 2025 may be taxed at your marginal tax rate. This could negate some of the tax savings if they sell the stock right away.
Control Concerns: With a UTMA, the child gets full control of the funds at the age of majority: 18 to 21 depending on your state. If you're picturing your 18-year-old driving a Tesla funded by Apple stock… well, you’re not alone.
Liquidity Risk: Although unlikely for families with larger estates, gifting too aggressively can reduce your future cash flow or limit flexibility, especially if estate tax laws change or your financial picture shifts.
Is This Strategy Right for You?
This strategy is ideal if your estate is nearing or exceeding the exemption threshold, and your goal is to transfer wealth efficiently. Gifting appreciated stock can be a smart, proactive play, especially when paired with other tools like irrevocable trusts, donor-advised funds, and family partnerships.
But the best strategies are personal. The right plan depends on your family, your finances, and your goals.
Want to make sure your gifts align with your long-term legacy—and your tax strategy?
At Formula Wealth, we specialize in multigenerational planning. We’ll help you reduce taxes, avoid probate, and pass the torch—not the tax.
Let’s make your plan as smart as your portfolio!
