Tax-Smart Strategies for Gifting Money to Family and Donating Stock to Charity

An estate plan can guide distribution of your assets after you're gone. But gifting money to family and donating to charity while you’re still alive allows you to:

• Improve the lives of others
• See the positive change your gift creates
• Potentially reduce estate taxes

Gifting money to family and donating stock to charity are two ways to leave a meaningful legacy. There are, however, rules and limits to be aware of. This article covers what you need to know, including:

• When cash gifts become taxable
• Lifetime gift tax exemptions
• The best way to donate stock to charity 
• How to make charitable contributions from an IRA

A multi-year gifting strategy can help ease the financial worries of loved ones and your favorite charities. A charitable giving strategy can also reduce your tax bill and minimize taxes on your estate, but you have to make the right moves at the right time.  

Gifting Money to Adult Children and Other Loved Ones

If you plan to give a substantial amount of money to a loved one, it may make sense to spread the gift over multiple years to avoid tax consequences. In 2025, you can gift up to $19,000 per person without having to file a tax form (this amount is adjusted for inflation each year). 

Gifts that exceed the annual threshold must be reported to the IRS on a US Gift Tax Return form. It is the responsibility of the giver to file this form.

Lifetime Gift Tax Limits and Estate Tax Exemptions

Gifting to loved ones over time removes the gifted amount from your estate, potentially easing the tax burden on your heirs after you pass away. 

Currently, the lifetime federal gift tax and estate exemption is $13,990,000 per person. Any annual gift amount above the threshold ($19,000 in 2025) will be applied against this lifetime gift and estate exemption. 

In other words, a person who passes away in 2025 will have the $13,990,000 exemption applied to the value of their estate and the sum of any annual gifts given in their lifetime above the annual gift limit each year. Estates above the exemption amount can be subject to a federal estate tax rate as high as 40%. 

There are two other factors to keep in mind:

#1 The estate exemption is always subject to future changes by Congress. We don’t know what exemption threshold will be five, ten, or twenty years from now. Even if your estate is currently under the current $13,990,000 threshold, it may not necessarily be under a new, potentially lower threshold years from now.

#2 Some states have estate taxes and/or inheritance taxes. If you live in one of these states, it makes sense to work with a financial advisor who can help navigate all of these various complexities.

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Charitable Contributions from an IRA (QCDs)

A Qualified Charitable Distribution (QCD) allows you to donate up to $108,000 (in 2025) from your Individual Retirement Account (IRA) directly to a qualified charity. QCDs can count toward satisfying your Required Minimum Distributions (RMDs) for the year and are not subject to income taxes.

QCD Requirements:

•  You must be at least 70 ½ years old to make a QCD
• The maximum amount for a QCD for 2025 is $108,000 (the amount is adjusted each year for inflation)
• The distributions must go directly to the qualified charity from your retirement account

Unlike a regular distribution from a retirement account, a QCD is not treated as taxable income. Also, lowering your IRA balance means your RMD amounts in future years will be lower. In some cases, it makes sense to start doing QCDs promptly at age 70 ½ to help lower your future tax burden in years to come. 

Donor-Advised Funds

When you open a Donor-Advised Fund (DAF) you receive an immediate tax deduction for the amount contributed to the DAF. Once established, you can direct funding to your favorite charities from the DAF over time.

Advantages of opening a DAF

• Receive a tax deduction in the year you contribute to the DAF
• You don’t pay capital gains taxes on assets contributed to your DAF
• Assets grow tax-free
• The assets in a DAF aren’t subject to estate taxes

DAFs are a great tool to support philanthropic causes over many years while also providing a tax benefit to the donor. As mentioned above, you can choose which organizations benefit from your fund. 

Donating Stock and Other Securities to Charity

If you have stock or other appreciated assets you’d like to donate to charity, here are a few strategies to consider:

Gift Your Asset Instead of Making a Cash Donation

Giving your stock (or other asset) directly to the charity is typically more tax efficient than selling the asset and donating the proceeds. By donating an appreciated asset, you can avoid paying capital gains tax on the increase in value. You can also deduct the fair market value of the donated asset from your income taxes in the year of the donation, up to the overall amount allowed by the IRS. 

The Bunching Strategy

Making several years’ worth of charitable contributions in a single year (bunching) may reduce your tax burden compared to donating smaller amounts every year. This strategy typically benefits taxpayers who are close to the standard deduction threshold. 

As you may know, charitable donations are only tax deductible when the taxpayer’s itemized deductions (including charitable giving) add up to more than the standard deduction. 

• The standard deduction for 2025 is $15,000 for single filers and $30,000 for married couples.
• By combining multiple years of charitable contributions into a single year, the standard deduction threshold may be exceeded. 
• You can then go back to using the standard deduction in the other years.

Minimize Tax and Maximize Your Impact

Our friendly and experienced Wealth Managers can analyze your financial situation and help you create a gifting strategy that minimizes taxes and maximizes the amount gifted to your family and favorite charities. For example, a stock holding with substantial unrealized capital gains would typically be a better candidate for a donor-advised fund donation or a charitable contribution than a gift to a family member.

Whatever your situation, we’re here to help you build out a plan to make gifting smarter, easier, and aligned with what matters most to you. To get started, contact us online or give us a call at (415) 541-7774.

We also have a free guide that outlines how to give with greater impact and greater tax efficiency. Download our Smart Giving Playbook.

Related Reading:

• The Smart Giving Playbook: Save More & Do More
• Planning for Inheritance
• Tax Planning Strategies for Non-Taxable Estates
• Estate Planning: How to Avoid Common Pitfalls and Costly Problems

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