When the stock market takes a nosedive, the headlines are filled with anxiety-inducing words like “plunge,” “collapse,” “sell” and “turmoil.” But amid the panic, there may be a golden opportunity—especially for those interested in estate planning and generational wealth transfer. Surprisingly, a downturn can be one of the most tax-efficient times to gift assets to your children and loved ones.
Why Gifting During a Market Decline Can Be Smart
Here’s the key idea: when the market drops, so does the fair market value of your assets. That means you can gift more shares of appreciated stock or other marketable securities within the same gift tax limits. If the market later rebounds—as it historically tends to do—your gift has the potential to appreciate significantly outside of your taxable estate. It’s a win-win.
A Quick Refresher on the Gift Tax Exemption
As of 2025, the IRS allows an individual to gift up to $19,000 per recipient annually without filing a gift tax return (the “annual exclusion”). You and your spouse can jointly gift $38,000 per recipient. Additionally, there’s a lifetime gift and estate tax exemption (currently $13.9 million per person) that allows for larger gifts without immediate tax consequences.
But here’s where timing matters: if your portfolio has temporarily decreased in value, you can transfer more shares now—while their value is lower—without exceeding these limits. Later, if those assets recover in value, that growth benefits your recipient tax-free and stays out of your estate.
Real-World Example
Let’s say you want to gift shares of a growth stock to your child. At the market’s peak, each share was worth $100, so you gift 190 shares at that price. After a crash, those same shares are worth $60. You can now gift 316 shares ($19,000 ÷ $60) instead of just 190 shares. If the stock rebounds to $100 in the future, your child ends up holding $31,600 in value—all from your $19,000 gift.
Additional Benefits
- Reduced estate size: Gifting during a downturn helps shift future appreciation out of your estate, which may reduce estate taxes later.
- Lock in depressed valuations: Especially useful for gifting interests in crypto, privately held businesses or real estate.
- Strategic trust planning: This is also an excellent time to fund irrevocable trusts like GRATs or IDGTs, which benefit from low valuations and potential upside.
Things to Keep in Mind
- Gift documentation: Be sure to document gifts properly and consider consulting with your CPA or estate planning attorney.
- Carryover basis: Remember that gifted assets retain your original cost basis. Your recipient may owe capital gains taxes when they sell—so it’s smart to include tax planning in the overall strategy.
- Potential sunset of exemptions: Current lifetime exemptions are set to reduce in 2026 unless Congress acts, so strategic gifting in 2025 may carry additional urgency, but more likely this will be after the next 4 years.
Final Thoughts
A market crash isn’t just a moment for reassessing your investment strategy—it’s a chance to be proactive about your legacy. By making gifts when valuations are low, you plant seeds that may grow well beyond the initial transfer. That’s not just smart lawyering—it’s smart family planning.
If you’re considering gifting strategies during this market cycle, now is the time to talk with your attorney or financial advisor. Sometimes, turbulent markets create the clearest paths to long-term wealth transfer. If you would like to discuss this gifting strategy please contact one of our experienced and board certified attorneys at [email protected] or by calling 512-263-5400 to schedule a complimentary virtual or in-person meeting.
