A sudden rise in net worth — from a business sale, market gain, or windfall — can create urgency around tax and estate planning. When that happens, it’s natural to feel pressure to “do something,” especially if your net worth now clearly exceeds the estate tax exemption. But before transferring wealth to the next generation, it’s important to slow down and get clear on your long-term needs and goals.
Step One: Pause Before Acting
The instinct to act quickly is often driven by taxes. Nobody enjoys paying them, and it’s easy to think that any move reducing a potential estate tax bill must be the right one. But the best decisions start with planning, not avoidance.
Before gifting anything, determine whether you truly have excess wealth to give away. A jump in paper net worth doesn’t always mean that money is available or that you won’t need it later.
Step Two: Reassess What You’ll Need
Start by revisiting your own goals. Do you want to travel more, buy a second home, or help family members purchase property? Those aspirations increase the amount you’ll want to keep under your own name.
A comprehensive spending analysis — looking at current lifestyle, future expenses, and major purchases — helps define how much you actually need to retain. Once that number is clear, add a buffer for flexibility. The remaining capital is what can safely be considered for gifting.
Step Three: Decide How to Transfer the Excess
If your estate is large enough that future growth will compound the tax problem, it often makes sense to move assets out of your estate sooner rather than later. In these situations, annual exclusion gifts ($19,000 per child in 2025) won’t make much difference. Larger transfers through irrevocable trusts are typically more effective.
Trust structures allow you to remove assets from your estate while maintaining control over when and how beneficiaries can access them. This can be crucial when children are still young or inexperienced with money.
Step Four: Build Guardrails into the Plan
It’s normal to worry about giving teenagers or young adults large sums. The good news is that trusts can be designed with clear terms and milestones to prevent misuse. For example, distributions might be tied to specific ages, life events, or financial accomplishments — such as completing education, reaching certain income levels, or purchasing a first home.
Trusts can also allow partial access over time rather than all at once. The goal is to provide meaningful opportunity while protecting long-term family wealth.
Step Five: Coordinate With Advisors
Once you’ve clarified what’s truly excess and how you want it structured, the next step is to collaborate with your estate attorney and tax advisor. They can help design the most efficient combination of trusts and gifting strategies while aligning with your family’s goals and values.
The Bottom Line
When your wealth grows quickly, the impulse to gift can feel urgent — but thoughtful planning matters more than speed. Start by defining what you need for yourself, identify what’s truly excess, and then use trusts and structured terms to support your children responsibly.
Done right, the process doesn’t just reduce future taxes — it builds a lasting foundation for how your family manages and preserves wealth across generations.
This post is adapted from a recent episode of the Scholar Wealth Podcast. For more perspective on family gifting and legacy planning, listen to the podcast episode here.