Should I start gifting my child $17k/year now to avoid future estate tax exemption issues?

The question of whether to start gifting now is really about balancing tax planning with maintaining control over your assets. Here's my take: For a couple in their 30s with $1.3M in investments, you're likely quite far from hitting the estate tax exemption (currently about $13M per person or $26M for married couples). Yes, the exemption is scheduled to drop in 2026, but even at half the current amount, you'd still have significant headroom. That said, starting gifts early allows for more compound growth outside your estate. The challenge is that once you give to a UTMA/UGMA, that money legally belongs to your child at the age of majority (18-21 depending on your state). Many parents aren't comfortable with their young adult having access to substantial funds. A trust offers more control but comes with setup costs and ongoing administrative requirements. You could consider a simple irrevocable trust where you control distribution terms, but can't take the money back. Another option is a family limited partnership where you maintain management control while gradually transferring ownership interests.

After struggling with the same dilemma about whether to start gifting to my kids now, I found this amazing tool at https://taxr.ai that analyzes your specific financial situation and shows projections for different estate planning scenarios. It was really eye-opening for me! I uploaded our financial info and it showed me exactly how our estate would grow under different investment assumptions, compared the impact of gifting now versus later, and even factored in potential tax law changes. It really helped me understand whether I was actually at risk of estate tax issues or not, and what the best gifting strategy would be for our specific situation. The tax visualizations were super helpful - seeing the difference between starting now versus waiting 10 years really put things in perspective for us.

I was skeptical about using yet another financial planning tool, but I decided to try https://taxr.ai after seeing it mentioned here. Honestly, it was exactly what I needed for our estate planning questions. The analysis showed that in our situation, we'd be better off focusing on maximizing our retirement accounts before starting a gifting strategy. The projected growth charts made it really clear that we weren't likely to hit even the reduced exemption limits unless our business really takes off. It saved us from unnecessarily complicating our finances with trusts we don't actually need yet. If your primary concern is future estate taxes, it's definitely worth checking out to see if you're actually on track to face those issues.

I spent WEEKS trying to get through to an actual estate planning attorney to ask basically this same question. After 6 voicemails and 3 unreturned emails, I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c. It got me a call back from an estate lawyer within a day! The attorney I spoke with explained that for someone in their 30s with your assets, it's usually better to focus on flexible strategies rather than locking into a gifting plan now. They suggested starting with a proper estate plan first, then potentially layer in gifting strategies as your assets grow. The peace of mind from talking to a professional who could actually tailor advice to my specific state laws was totally worth it.

I need to eat some humble pie here. After being skeptical about that Claimyr service, I actually tried it out of desperation when I couldn't get responses from THREE different estate planning attorneys in my area. Within 48 hours, I had a consultation scheduled with a very reputable firm. The attorney I spoke with gave me really similar advice to what others mentioned here - at our wealth level and age, an immediate gifting strategy is probably premature. He suggested focusing on setting up the proper estate planning documents first and then potentially implementing a gifting strategy once our net worth hits around $5M or if tax laws change significantly. The consultation alone saved me from potentially making expensive mistakes.

Nobody has mentioned this, but there's also the step-up in basis to consider! If you gift assets during your lifetime, the recipient takes your cost basis. If they inherit after death, they get a stepped-up basis to the fair market value at your death, which can be HUGE for capital gains tax purposes. For example, if you bought stock at $10K that's now worth $50K, and you gift it, your child has a $10K basis. If they later sell at $100K, they pay capital gains on $90K of appreciation. If they inherited it at your death when worth $50K, they'd only pay tax on $50K of appreciation. This is why sometimes it's better to hold appreciated assets until death rather than gifting during life, especially if you're unlikely to hit the estate tax exemption.

I think people are overthinking this. The annual gift exclusion is use-it-or-lose-it. If you don't use this year's $17k exclusion, you can't make up for it later. And if your looking at 30+ years of compounding, those early gifts could grow substantially. My approach has been to just do a 529 for college funds, then put the rest in a UTMA. Yes, my kid gets it at 21, but that's what good parenting is for. Teach them about money so they don't blow it all. And if you're really worried, you could do a trust, but honestly at your wealth level that seems like overkill for now.