Giving While You're Living: Why Timing May Matter More Than Amount

One of the most common sentiments we hear from retirees is a desire to help their children and grandchildren and leave them better off. What's less common is a discussion about the how and the when.

With many of our retired clients, their adult children experience the greatest financial strain during the very years when their parents (our clients) have accumulated substantial wealth. The kids are usually trying to fund a downpayment on a home, juggling mortgage payments, saving for college, raising children, funding exorbitant club sports fees (a topic for another time - don’t get me started), and trying to build financial security at the same time. Yet, in many young families, most inherited wealth won't arrive until those challenges are long behind them.

That raises an important planning question: shouldn’t we measure wealth by its impact? To do that, don’t we need to factor in when money it can provide the greatest value?

And while this overall mindset certainly applies to charitable giving to non-profits, the focus of this article is on family giving. Charitable giving is certainly an honorable pursuit for many of the same reasons, but the tax laws are significantly different for charity and warrant an entirely separate discussion.

If you consider the typical life cycle of many adult children, their financial pressures are often greatest between ages 30 and 50. During these years, financial flexibility can make a meaningful difference.

A gift used to help with a downpayment could reduce a mortgage balance and improve monthly cash flow for decades. Assistance with college costs may help a family avoid significant student debt. Additional savings during peak earning years can benefit from years of future compounding for retirement.

Contrast that with an inheritance received at age 60 or 65. The money is still valuable, but the recipient may have already paid off the mortgage, completed college funding, accumulated retirement assets, and reached a point of relative financial stability. An inheritance may improve an already comfortable situation rather than fundamentally changing financial outcomes.

Bill Perkins explores this concept in his book, Die With Zero. He argues that many people focus exclusively on maximizing their final net worth while overlooking the value that money can create at different stages of life. A dollar gifted to a 35-year-old trying to raise a family, buy a home, or save for college may have a very different impact than the same dollar received through an inheritance at age 65. While not every family will agree with all of Perkins' conclusions, his broader point is worth considering: the timing of financial assistance can be just as important as the amount.

The question becomes less about preserving wealth and more about deploying it effectively.

There are also non-financial advantages to lifetime gifting. There’s an old, morbid joke that states, “it’s better to give with warm hands than with cold hands," which essentially means parents can see the impact of their generosity to their heirs firsthand. In many cases, that can be more rewarding than leaving a larger estate decades later.

Importantly, none of this suggests retirees should jeopardize their own financial security. Maintaining independence remains the priority, as no parent wants to become financially dependent on the very children they were trying to help. The question is whether assets, which are highly unlikely to be needed for retirement, could create more value today than in the future.

Financial gifts aren't the only way to transfer wealth during your lifetime.

For many families, spending money on shared experiences can be just as meaningful as transferring dollars to the next generation. A family vacation, a multi-generational trip, a special family reunion, or other experiences that bring children and grandchildren together can create benefits that extend far beyond the financial cost.

Many retirees eventually discover that the window for certain experiences is smaller than expected. Grandchildren grow up quickly, adult children become busier, and health limitations can emerge with little warning.

Assuming it conforms to the broader wealth plan, wealth should not be viewed solely as something to accumulate and eventually transfer. Instead, these experiences often become some of the family's most treasured assets, even if they don’t appear on a balance sheet.

The appeal of lifetime gifting is easy to understand, but implementing it thoughtfully requires planning.

Before making substantial gifts, it is prudent to update retirement projections and stress-test the plan. This usually requires a detailed cash flow analysis and variances on different levels and timing of giving.

Questions worth evaluating include:

• What happens if portfolio returns are below expectations?
• What if one, or both, spouses require long-term care?
• How would higher inflation affect the plan?
• What level of gifting can occur while maintaining a comfortable margin of safety?

For many affluent retirees, the analysis may reveal that meaningful gifting can occur without materially increasing retirement risk. For others, it may suggest a more modest approach. Either outcome provides useful information. The goal is not to maximize gifting, the goal is to maximize gratification, without compromising retirement security.

One of the most common misconceptions is that gifts automatically result in some form of gift taxes. The good news is that most family gifts do not result in any immediate tax liability.

For 2026, an individual may gift up to $19,000 per year to any other individual without triggering gift tax reporting requirements. This means married couples can effectively combine their exclusions and gift up to $38,000 per recipient per year. The limit applies on a per-person, per-recipient basis, allowing families with multiple children and grandchildren to transfer substantial amounts each year without using any portion of their lifetime exemption.

For 2026, the federal estate and gift tax exemption is $15 million per person or $30 million for a married couple with proper portability elections. As a result, many families can transfer assets far in excess of the $19,000 per person, per year annual exclusion without ever paying federal gift tax.

Another common source of confusion is the distinction between filing a gift tax return and owing gift tax.

If you give more than $19,000 to any one individual during 2026, the excess amount generally requires the filing of IRS Form 709, the federal gift tax return.

For example, if you gift a child $100,000 in 2026, the first $19,000 falls under the annual exclusion and the remaining $81,000 is generally reported on a gift tax return. That excess amount simply reduces a portion of your lifetime estate and gift tax exemption.

Importantly, filing a gift tax return does not mean you owe gift tax. For most retirees, it is simply a reporting requirement that notifies the IRS that part of the lifetime exemption has been used. Generally, if cumulative lifetime gifts remain below the current $15 million individual exemption, or $30 million married-couple exemption, no federal gift tax would be due.

Understanding this distinction can help retirees avoid unnecessary limiting of gifts out of concern that transferring more than the annual exclusion amount will automatically trigger a tax bill.

In some situations, gifting appreciated stock may be worth considering. Suppose parents own investments with substantial unrealized gains. If an adult child falls within the 0% long-term capital gains tax bracket, transferring appreciated shares could create tax efficiencies for the family. The child may be able to sell the shares and recognize gains at a lower tax rate than the parents would face.

This strategy is not appropriate in every situation. The loss of a future step-up in basis at death, state tax considerations, and the child's overall tax circumstances should all be evaluated before proceeding. Nonetheless, for some families, gifting appreciated securities instead of cash can be an effective planning opportunity.

Perhaps the most important consideration has nothing to do with taxes. Parents should be careful not to unintentionally create the expectation that gifts will continue indefinitely. A one-time gift, intended to help with a specific goal, can gradually become viewed as a recurring benefit, or an entitlement, if expectations are not clearly established ahead of time.

For that reason, families should clearly address the following questions:

• What is the purpose of the gift?
• Is this intended to be a one-time transfer or part of an ongoing strategy?
• Should future gifts be expected?
• Under what circumstances might gifting stop?

The objective is not to attach strings to every dollar. Rather, it is to avoid misunderstandings that can strain family relationships. The most successful gifting strategies often involve clear communication from the beginning. Adult children understand the gift is an act of generosity, not an entitlement, and parents retain flexibility to change course if circumstances evolve.

When discussing inheritances, many families focus exclusively on how much will eventually be transferred.

The more important question may be when the transfer occurs. For retirees who have sufficient assets to support their own lifestyle, health care needs, and long-term goals, strategic lifetime gifting can provide meaningful benefits to the next generation during the years when financial demands are often highest.

The best outcomes typically occur when gifting decisions are made deliberately, modeled carefully within a retirement cash plan, structured tax-efficiently, and supported by clear family communication.

Ultimately, the goal isn't simply to leave money behind. It's to use wealth in a way that creates the greatest positive impact. That may involve gifting assets to children when financial demands are highest, funding opportunities that might otherwise be out of reach, or creating experiences and memories that can be shared across generations. For many families, the most meaningful legacy consists of both: helping loved ones financially when it matters most and creating memories together that will last well beyond the financial assets.