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Gifting Strategy

Sep 23, 2025 | Insights

It’s sometimes referred to as the “Great Wealth Transfer.” As baby boomers turn 65, their attention turns more towards how to transfer their wealth rather than how to accumulate it. Seeking to transfer wealth as tax-efficiently as possible is not just a matter of concern for baby boomers, though. You might be someone who’s managed to accumulate wealth well before retirement age, or you might be retired and find yourself with the means to help others. You’re in the enviable position of having the means, so it’s important to understand the federal rules in place when it comes to making gifts, as well as the options available to you when you want to help someone through the use of a financial gift.

Executive Summary

The Annual Gift Tax Exclusion
Gifting Options
How to Get Started

First, we’ll take a look at the annual gift tax exclusion so that you can see how much you can gift someone without the federal gift tax coming into play. Then, we’ll look at a number of different ways that you can provide gifts to friends or family members, taking into consideration that not all gifts need to be cash, and there are ways that you can set things up so that you can either provide immediate assistance or set someone on the path to saving for retirement.

The Annual Gift Tax Exclusion

Federal law allows you to gift up to $19,000 in cash or assets to someone in 2025 without having to worry about paying a gift tax.That limit is per person, not the sum total of your gifts, so you can gift up to $19,000 to as many people as you want. If you are married, you and your spouse can elect to split a gift, which means that the two of you together can gift $38,000 to one recipient. While you don’t need to pay gift tax on the sum, if you choose to split a gift, you do have to file a gift tax return.

In addition to the annual gift tax exclusion, the lifetime gift tax exemption in 2025 of $13.99 million allows you to gift beyond $19,000 to an individual without paying gift tax. What that means is that, when done properly, you could gift someone $14.009 million in 2025 and not have to pay any gift taxes on the transfer. You do need to file a gift tax return, though, and the amount above the annual gift tax exclusion reduces the value of your estate tax exemption (both are the same amount), dollar for dollar. The federal estate and gift tax exemption is scheduled to rise to $15 million per individual in 2026 and be indexed for inflation for subsequent years, with the tax rate remaining at 40%.

Gifting Options

When gifting stock or cash for investment purposes, it’s reasonable to wonder what equities you should gift or recommend for the beneficiary. In most cases, people would benefit from professional investment management. Consider an actively managed mutual fund such as the Chase Growth Fund (CHASX). It is managed as an all-cap growth strategy and has investment professionals who are constantly monitoring the underlying holdings and making changes as they deem appropriate. By gifting or recommending an actively managed mutual fund, even investors with as little as $2,000 may benefit from the advantages of having someone monitoring their investments full-time.

Gifting Stock

Gifting a stock to someone else is a way for you to avoid paying taxes on the gain. When you gift a stock, the recipient inherits your cost basis in it. This allows the recipient to either sell it and pay taxes on the gain (usually at a lower rate than you would pay) or allow the asset to (hopefully) continue to increase in value. Let’s take a look at how this would play out in real life.

Assume you bought Stock XYZ ten years ago for $3,000, and today it is worth $10,000. If you wanted to give your nephew $10,000, you could sell the stock and realize $7,000 in long-term capital gains (paying tax on that gain), then write him a check for $10,000. However, you could have your nephew open their own brokerage account and have the stock transferred to their account as a gift. You avoid paying taxes on the gain, leaving it up to him to decide when he wants to sell it and realize a gain.

Gifting a Traditional/Roth Individual Retirement Account (IRA)

While you can’t open an IRA on behalf of someone else, you can gift them money that they can use to open or contribute to one. In 2025, individuals can contribute up to the lesser of 100% of taxable compensation or $7,000 ($8,000 if they are 50 or older). Assuming the person you’re gifting money to is eligible to make the full $7,000 contribution, your gift can not only help them save the maximum amount for retirement, but they can also deduct the IRA contribution from their income taxes.

Gifting money to someone for their Roth IRA is similar to gifting them money for a traditional IRA. The eligibility requirements are similar (contributions can be up to the lesser of 100% of taxable compensation or $7,000, $8,000 if they are 50 or older). However, contributions to a Roth IRA are not deductible from income taxes. So why would you want to help someone contribute to a Roth IRA over a traditional IRA if they don’t get the tax deduction? It’s all about how the two retirement vehicles are taxed.

With a traditional IRA, you receive a tax deduction on your contributions and the money grows tax-deferred, but when you make withdrawals at retirement age, you pay income taxes on the money at that time. With a Roth IRA, your investment grows tax-free, not just tax-deferred. This can be particularly advantageous when someone (such as a young person) is in a low tax bracket. By foregoing the tax deduction now, they are able to build up wealth tax-free in the future.

Gifting a Custodial Roth IRA

If a child or grandchild is under the age of 18 but has earned income, you can consider gifting money to a custodial Roth IRA. The income eligibility and limits are the same as for a traditional Roth IRA, but since the account is in a minor’s name, a designated custodian (generally you or another parent) would oversee the account and make the investment decisions. Note that while you might be acting as the custodian, once the child turns 18, they will take full control of the account.

UGMAs and UTMAs

As we saw with a custodial Roth IRA, gifting assets to a minor requires a custodian. The Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) were designed to simplify the process. A UGMA account allows minors to own cash, stocks, bonds, life insurance and annuities. A UTMA account expands this list to include real estate and other types of property. The custodian manages the account and makes decisions about how to invest and use the assets in the minor’s best interests. Once the minor reaches a specified age, control of the assets passes entirely to the child.

How to Get Started

Whether you want to use cash or stocks, there are a number of ways that you can help friends or family members through the use of gifts. Consult with a trusted financial professional to help walk you through the best way to help loved ones while avoiding negative tax consequences. When done properly, you can help loved ones on the way to building wealth and having a more secure financial future.

About Chase Investment Counsel

Chase Investment Counsel is a family and employee-owned boutique wealth management firm that offers personalized investment services. Our clients include career professionals, those nearing or in retirement, and families experiencing financial transitions such as generational wealth transfer, widowhood, divorce, or sale of a business. Chase’s active, disciplined investment management team is focused on selecting individual stocks and bonds targeted to each investor’s specific financial goals and risk tolerance. Established in 1957 in Charlottesville, VA, Chase Investment Counsel manages more than $400 million in assets as of August 31, 2025.

The Chase Growth Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. The Statutory and Summary prospectuses contain this and other important information about the investment company and may be obtained by calling (888) 861-7556 or visiting www.chasegrowthfund.com. Read carefully before investing.

Mutual fund investing involves risk, principal loss is possible. The Chase Growth Fund may invest in mid-cap companies, which involve additional risks such as limited liquidity and greater volatility. The Chase Growth Fund may invest in foreign securities traded on U.S. exchanges, which involve greater volatility and political, economic and currency risks and differences in accounting methods. Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales.

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