How to Use Gift Planning in an Estate Plan

Gift planning can be a key element in an estate plan. If it is done properly, a gifting strategy can ensure that your assets are given to the people and organizations you care about while minimizing the impact of taxes and other costs on your estate. It’s important to make sure your personal assets and potential tax events are taken into consideration before moving forward with your estate plan and any gifting you want to do. Planning your estate can be difficult if you’re not a professional so you may want to consider working with a financial advisor with expertise in this area to make sure you’ve taken the right things into consideration.

What Is Gift Planning?

Gift planning is the process of strategically transferring assets to family members, friends or charitable organizations during your lifetime or as part of your estate. It goes beyond simple gift-giving by incorporating financial planning techniques to maximize benefits for both the giver and the recipient. This approach can involve various assets, such as cash, stocks, real estate, or business interests, tailored to meet specific goals.

One key aspect of gift planning is leveraging tax-efficient strategies. For instance, lifetime gifts can take advantage of the annual exclusion limit ($19,000 in 2025), which allows a set amount to be given tax-free to an unlimited number of recipients each year. For larger gifts, the lifetime exemption ($13.99 million in 2025) can be used to minimize estate taxes. Charitable gifts, such as donations to a qualified nonprofit, may also provide immediate tax deductions while supporting meaningful causes.

Gift planning often aligns with broader estate planning objectives, including wealth preservation, family support, and philanthropic pursuits. It requires a careful assessment of financial circumstances, long-term goals, and the potential tax implications of each decision.

How to Use Gift Planning in an Estate Plan

Gift planning can be a powerful tool in an estate plan when tailored to specific financial and personal goals. Below are several strategies to consider, each offering unique benefits and opportunities for reducing tax liabilities and transferring wealth effectively.

Annual Gift Tax Exclusion

In 2025, individuals can give up to $19,000 per recipient without triggering gift tax. Married couples can combine their exclusions to give up to $38,000 per recipient. This strategy is ideal for gradually transferring wealth to family members or friends while keeping the taxable estate smaller. For example, using the exclusion to fund a child’s education or contribute to a down payment on a home can provide meaningful support without tax implications.

Lifetime Gift and Estate Tax Exemption

The lifetime exemption of $13.99 million in 2025 allows individuals to transfer significant wealth without incurring federal estate or gift taxes. This exemption applies to larger, one-time gifts, such as transferring ownership of a family business or real estate. Using this strategy early can help lock in the current exemption limits, which may change in future tax years.

Charitable Giving

Donating appreciated assets, such as stocks or property, allows individuals to avoid capital gains taxes and receive a charitable deduction. Setting up a charitable remainder trust (CRT) provides income to designated beneficiaries for a specific period, with the remaining assets donated to a nonprofit. Alternatively, a donor-advised fund offers flexibility in managing donations over time while maximizing tax benefits.

A qualified charitable distribution (QCD) is another option to explore in your gift planning strategy. as part of your gift planning strategy. This involves taking a withdrawal from an IRA and directing the funds straight to an eligible charitable organization. QCDs also satisfy required minimum distribution (RMD) rules that apply when a person reaches age 73 (75 if you were born in 1960 or later), and in turn, lower a person’s tax bill.

529 Plans for Education

Funding a 529 plan can also be a way to transfer wealth in a tax-efficient manner and support someone’s educational pursuits. Contributions qualify for the annual exclusion, and accounts grow tax-free when used for qualified education expenses. Individuals can “superfund” these accounts by contributing up to five years’ worth of exclusion amounts upfront.

Irrevocable Trusts

Irrevocable trusts allow individuals to remove assets from their estate while maintaining control over how they are distributed to beneficiaries. Trusts such as grantor retained annuity trusts (GRATs) or spousal lifetime access trusts (SLATs) can optimize tax efficiency and provide financial security to family members.

Gift Planning in Action

To illustrate how gift planning can work, consider James, a retired entrepreneur with a $25 million estate. James wants to reduce estate taxes, support his family and contribute to a charitable cause.

To begin, James uses the annual gift tax exclusion to gift $19,000 to each of his six grandchildren, transferring $114,000 tax-free annually. He also contributes $95,000 per grandchild to 529 plans, leveraging the five-year “superfunding” rule to prepay for their education while minimizing taxable gifts.

Next, James donates $2 million in appreciated stock to a charitable remainder trust (CRT). This move avoids capital gains taxes on the stock’s growth, provides James with an income stream for 15 years, and leaves the remainder to his chosen nonprofit. He also uses $12 million of his lifetime exemption to transfer ownership of a vacation property and investment portfolio to an irrevocable trust, reducing the taxable value of his estate while securing his family’s financial future.

By strategically combining these gift planning techniques, James significantly lowers his estate’s taxable value, saving millions in potential taxes while achieving his philanthropic and family goals.

Why You Should Consider Gift Planning

Gift planning can often be a crucial piece of income for the recipient organization, which may rely on that gift to launch new initiatives, maintain an existing initiative or even stay open. Aside from the generosity of giving to an organization, you stand to benefit from gift planning.

While you’re alive, you can contribute appreciated property, like stock, bonds and other securities and receive a charitable deduction for the full market value of that asset. Along with that, you won’t pay any capital gains tax when transferring. When you make a contribution after you die, the gift doesn’t come with a lifetime income tax deduction, but it is exempt from estate taxes.

Bottom Line

If you have the desire and assets to set up gift planning, you might want to add it to your estate plan. You and the nonprofit can both benefit from planned gifts. You and your estate can get a sizable tax break. Plus, you may be able to gift part of your estate to help build a cause that is important to you and give you a sense of pride knowing you’re leaving part of your assets to help that cause progress.

Tips for Estate Planning

Consider talking to a financial advisor about making gift planning part of your financial plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Before you can dole out who gets what, you’ll need to take inventory of what you have, including things like securities and other investments. You might want to create a spreadsheet or other document that has a list of every asset you have and its value at the time. Make sure you share this document with others so they know what to keep track of. Then consider using our free estate planning checklist to make sure you don’t forget any important steps.