Retirement Retired Life

Why Smart Retirees Aren’t Waiting To Leave an Inheritance

Giving while living can do more good than leaving a lump sum.

By Chris Lewis, CEPF , Edited by Laura Hohenstein

Updated Oct. 25, 2026

Add Us On Google

One of the quieter shifts in retirement planning is the growing number of retirees choosing to give money away now rather than leaving it all at death. The impulse is not just sentimental. For families who make the right moves at the right time, lifetime giving can accomplish more than a traditional inheritance in almost every meaningful way.

The question is not whether to give. The question is when, how much, and in what order.

Get a protection plan on all your appliances

Did you know if your air conditioner stops working, your homeowner’s insurance won’t cover it? Same with plumbing, electrical issues, appliances, and more.

A home warranty from Choice Home Warranty could pick up the slack where insurance falls short.

For a limited time, you can get your first month free with a Single Payment home warranty plan.

Get a free quote

The non-tax case is stronger than the tax case

The most compelling reason to give earlier has nothing to do with estate taxes.

Adult children today are increasingly inheriting in their 60s rather than their 40s or 50s, as parents live longer into their 80s and 90s.

A child who is 62 or 64 when they inherit is past the window when a meaningful sum of money would have genuinely changed their trajectory. The down payment on a first home, the tuition bill that determined whether they borrowed heavily, the childcare costs that forced one parent to reduce hours at work: those decisions were made 20 or 30 years earlier.

Giving now lets a parent direct the money toward something specific and see the result. A check to help with a grandchild's education, a down payment gift that reduces a child's mortgage burden for the next 30 years, or help with medical expenses that would otherwise drain a younger family's savings. These land when the impact is highest.

That is the case for giving early. It does not require any tax planning at all.

Shopping for cheaper auto insurance? Enter your zip code here to get started.

What you can give without touching the lifetime exemption

For families who want to give systematically, several mechanisms let them transfer meaningful sums without any gift tax consequences.

The annual exclusion. In 2026, any individual can give up to $19,000 per recipient per year without filing a gift tax return or reducing the lifetime exemption. The exclusion applies per recipient, so a parent can give $19,000 to each child, each grandchild, and any other person in a single calendar year with no tax implications at all.

Gift splitting for married couples. When both spouses elect to split gifts, the per-recipient limit doubles to $38,000 per year. A couple with three adult children can transfer up to $114,000 per year entirely outside the gift tax system using only the annual exclusion.

Direct tuition and medical payments. This is the mechanism most families never use and arguably the most powerful one. Payments made directly to a qualifying educational institution for tuition, or directly to a medical provider for care, are completely excluded from the gift tax system regardless of amount. They do not count against the annual exclusion or the lifetime exemption. A grandparent who pays a grandchild's tuition directly to the university is making a transfer that does not appear in any gift tax calculation at all.

The tax reality most families face

For most households, the estate tax question is essentially moot. The 2026 lifetime exemption is $15 million per individual, or $30 million for married couples, made permanent by the One Big Beautiful Bill Act signed in 2025.

Only about 0.2% of estates owe any federal estate tax. For the vast majority of families, the estate tax is simply not the variable that drives the giving decision.

What does matter for most families is the basis question.

Assets held until death receive a stepped-up basis, meaning the embedded capital gain that accumulated over decades disappears at the moment of inheritance. A stock your parent bought for $10,000 that is worth $200,000 when they die transfers to you at a basis of $200,000. You owe no capital gains tax on that $190,000 of appreciation.

Give that same stock during your lifetime, and the recipient inherits your original basis of $10,000. When they sell, they owe capital gains tax on $190,000 of gain they never actually earned.

The practical implication: give cash or newly purchased assets during life. Hold highly appreciated assets until death.

If you’re over 50, take advantage of massive discounts and financial resources

Over 50? Join AARP today— because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.

Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up to 25% off your AARP membership, making it just $15 the first year with auto-renewal.

The risks that argue for restraint

Giving money away while living carries real risks that need to be taken seriously before any gift is made.

The Medicaid five-year lookback. Medicaid, which pays for long-term care when a person's assets are exhausted, reviews five years of financial transactions before approving eligibility. Gifts made within that five-year window can be counted as disqualifying transfers, delaying eligibility for months or years and leaving the donor without coverage for care they cannot afford to pay for privately. Anyone who may need Medicaid-funded long-term care in the foreseeable future should consult an elder law attorney before making large gifts.

Giving away money the donor later needs. The sequence matters enormously. A retiree who gives generously at 70 and then faces a major health event at 80 may find they have given away capital they need. Longevity risk is real. A 70-year-old today has a meaningful probability of living into their late 80s or early 90s, and the costs of those final years can be substantial.

Family friction from uneven gifts. When gifts are not equal across children, whether because one child is in greater need or one has a closer relationship with the parent, it creates tension that can outlast the donor. Being transparent about why gifts differ, or consulting an estate attorney about how to document the reasoning, could reduce the risk of conflict after the fact.

Which assets to give and which to hold

The right answer depends almost entirely on basis and expected appreciation.

Give cash, savings bonds matured to face value, or assets with little embedded gain. These are the right assets to move during life because there is no step-up benefit being sacrificed.

Hold highly appreciated stocks, real estate, and business interests until death. The step-up in basis at death eliminates capital gains that could otherwise generate a large tax bill for the recipient.

Consider 529 accounts for education giving. Contributions to a 529 plan are treated as completed gifts but remain under the donor's control and can be reclaimed in certain circumstances. Superfunding a 529 allows a one-time contribution of up to $95,000 per beneficiary in 2026 (five years of exclusions front-loaded), removing the asset from the estate while retaining some flexibility.

Bottom line

The biggest reason to give while you're still living may have less to do with taxes and more to do with timing. Money given to children in their 30s or 40s can help when they need it most, whether that means buying a home, raising a family, or building financial security.

Before giving, however, make sure your own retirement plan is secure. Account for Social Security, pensions, investments, long-term care costs, and potential Medicaid rules. Once your own needs are covered, you can decide when your money could make the biggest difference for your family.

More from FinanceBuzz:

Reach Your Savings Goals Faster

5.0

AWARD WINNER Best Online Checking

SoFi Checking and Savings Benefits

Limited-Time Offer: Earn a $50 or $400 bonus with eligible direct deposit and up to 4.40% APY on Savings (3.30% APY¹ New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Eligible Direct Deposits received within 25 calendar days of your first Eligible Direct Deposit of $1 or more) OR $400 (with at least $5,000 total Eligible Direct Deposits received within 25 calendar days of your first Eligible Direct Deposit of $1 or more). Cash bonus amount will be based on the total amount of Eligible Direct Deposit received within 25 calendar days of your first Eligible Direct Deposit of $1 or more. If you have satisfied the Eligible Direct Deposit requirements but have not received a cash bonus in your Checking account, please contact us at 855-456-7634 with the details of your Eligible Direct Deposit. Direct Deposit Promotion begins on 5/15/2026 and will be available through 12/31/2026. Full terms at <a href="https://www.sofi.com/banking/">sofi.com/banking</a>. SoFi Checking and Savings is offered through SoFi Bank, N.A., Member FDIC. SoFi members with Eligible Direct Deposit can earn 3.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Eligible Direct Deposit amount required to qualify for the 3.30% APY for savings (including Vaults). Members without Eligible Direct Deposit will earn 0.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of 9/23/26. Fees may reduce earnings. Additional information can be found at <a href="https://d32ijn7u0aqfv4.cloudfront.net/wp/wp-content/uploads/raw/SoFi-Bank-Rate-Sheet-September-23-2026.pdf">http://www.sofi.com/legal/banking-rate-sheet</a>. with +1.10% APY Boost) for up to 6 Months on new accounts. Terms Apply.² Earn up to 4.40% Annual Percentage Yield (APY) on one SoFi Savings account with a 1.10% APY Boost (added to the 3.30% APY as of 10/20/26) for up to 6 months. Open your first SoFi Checking and Savings account and receive eligible direct deposits OR qualifying deposits of $5,000 every 31 days by 12/31/27. Rates are variable, subject to change. Terms apply at <a href="https://www.sofi.com/banking/#4">sofi.com/banking#4</a>. SoFi Bank, N.A. Member FDIC.
No account, overdraft, or monthly fees³ We do not charge any account, service, or maintenance fees for SoFi Checking and Savings. We do charge transaction fees for outgoing wire transfers, Instant Transfers, and global remittance transfers. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at <a href="http://sofi.com/legal/banking-fees/">sofi.com/legal/banking-fees/</a>.
Get your paycheck up to two days early with direct deposit⁴ Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.
Access additional FDIC insurance up to $3 million⁵ SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at <a href="http://sofi.com/banking/fdic/sidpterms">SoFi.com/banking/fdic/sidpterms</a>. See list of participating banks at <a href="http://sofi.com/banking/fdic/participatingbanks">SoFi.com/banking/fdic/participatingbanks</a>.

5.0

Open an account with SoFi® here