Wealth managers say more clients are transferring assets to their children during their lifetimes. Here are the best ways to do it.
For all the talk about the ‘Great Wealth Transfer’ going on between the Baby Boomers and their heirs, advisors say there’s a concurrent, yet far less recognized, movement of generational money taking place called “giving while living.”
Because inheritances often arrive late in life, more families are now choosing to give earlier, helping with expenses such as student loans, home purchases, or small-business funding. As a result, wealth managers are being asked to guide these decisions so parents can provide meaningful support without undermining their own long-term financial security.
Jody King, director of wealth planning at Fiduciary Trust Company, says she starts client conversations about this new form of wealth transfer with a “giving conversation,” in which she works with clients to identify their true goals, both current and future.
“Once all of us fully understand their goals, we can assist the client with identifying what capacity they have to give without compromising their own retirement and other goals. Giving could incorporate wealth transfer to family members as well as the satisfaction of philanthropic goals and could include one time or annual gifting strategies,” King said.
Chris Maudlin, senior wealth advisor at AlphaCore Wealth Advisory, says he starts by building a detailed retirement plan that accounts for longevity, healthcare costs, inflation, and market volatility.
“Once we have a clear picture of what’s needed to sustain their lifestyle, we can model different gifting scenarios to see what’s possible without compromising their financial security. It’s a balance between generosity and prudence — and we stress that financial independence should remain their first priority,” Maudlin said.
How not to lend a hand
Tax-efficient giving for the benefit of family members can include utilizing annual exclusion gifts to or for the benefit of children, grandchildren, and possibly spouses. Fiduciary Trust’s King says planning gifts of all or part of the federal estate tax exemption amount (currently $13.991 million, going to $15 million per person on 1/1/26) can be very tax efficient, especially when gifting into an irrevocable and intentionally defective grantor trust where the grantor pays the income tax on the income inside the trust while they are alive.
“This allows the assets gifted to the trust to effectively grow tax free inside the trust while the grantor is alive since they are paying the income taxes associated with the assts in the trust. If the grantor does not wish to pay the income taxes, then using a trust situs such as New Hampshire can help mitigate the state income taxes that the trust may otherwise pay,” King said.
Either way, irrevocably gifting today removes future appreciation from the grantor’s estate. Advisors say Grantor Retained Annuity Trusts (GRATs) and other techniques can also be very tax efficient.
Common mistakes when helping children financially include gifting in a way that creates an unintended financial dependence, such as the receipt of annual exclusion gifts becoming part of a child’s expected household budget, as well as failing to take advantage of annual exclusion gifts for families with significant wealth.
Other mistakes, according to King, include putting too much money directly into the hands of children before they are ready, and gifting low basis assets to children, which just shifts the income tax burden to children. She also warns against putting too much money in UTMA (Uniform Transfer to Minor’s Act) accounts where the minor has full access/control of the assets by the time they reach 21. King also guards clients against over-funding Section 529 plans when it would be better to make gifts to irrevocable trusts that have more flexibility on what the funds can be used for.
AlphaCore’s Maudlin believes annual exclusion gifts (currently $19,000 per recipient in 2025) to be a simple and effective way to transfer wealth without triggering gift tax reporting.
“For larger transfers, we might recommend using a family trust, direct tuition or medical payments which are gift-tax exempt, or funding a Roth IRA or 529 plan for a child. A common mistake we see is making large gifts without fully considering the tax implications or how it impacts long-term cash flow,” Maudlin said.
Bill Ringham, director of private wealth strategies, RBC Wealth Management US, believes the biggest mistake clients make is not preparing their heirs for their inheritance or communicating their wishes for the money.
“The 2024 RBC national wealth transfer survey revealed that many heirs receive little information and education before, during and after the inheritance process. In fact, only 39 percent of those leaving an inheritance have provided guidance or direction to their beneficiaries about their intentions for the wealth,” Ringham said.
Without preparation, Ringham feels heirs may squander wealth – or be paralyzed by it.
“Lifetime gifting offers you time to explain your values and wishes, to educate your heirs on managing the assets and to answer any questions that may arise in the process,” Ringham said.
Keeping the family peace
One of the biggest struggles advisors often face is keeping the division of assets among family members equitable to avoid conflict later on. Ideally, families should have an open dialogue about gifting and the desire to be fair.
For example, King points out it can be “very harmful to relationships” if a child finds out their sibling has been financially favored for years and things are not being equalized. That’s why clients often include an advancement clause in their estate planning documents, that might refer to gift tax returns or other documentation, so that things can be equalized at the end of the day.
Maudlin encourages families to be transparent when it comes to gifting. One approach is to track gifts as “advancements” on a future inheritance, documented clearly in the estate plan. Others prefer to keep a running ledger outside of formal documents but shared among beneficiaries.
“In some cases, a written family gifting policy or family meeting can help set expectations and reduce future misunderstandings. Ultimately, clear communication and proper documentation are key to preserving both fairness and family harmony,” Maudlin said.
For those who are uncomfortable leading family meetings, Ringham says a financial advisor can be brought in as a neutral third party to guide the discussions. Parts of these conversations should involve not only the discussion surrounding the transfer of wealth, but of family legacy and family values.
“If the parents discuss them while they’re alive, heirs can better process those plans, even those they may feel aren’t fair,” Ringham said.
