Sources:
1 The 2 moments that matter: Financial professional strategies for the Great Wealth Transfer, Protective Life, 2026.
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For many people, inheritance means money and assets heirs receive after someone passes away. But there’s an alternative form of wealth transfer called a living inheritance, when an individual gives while they are still living.
A living inheritance, sometimes also called lifetime giving or “giving while living,” involves transferring assets or gifts to heirs while the bequestor is still alive. Unlike estate-based inheritance that occurs after death, the goals of a living inheritance may be to financially support family now and reduce estate complexities later.
A living inheritance can include:
Protective’s research shows 60% of inheritors expect to receive a lifetime transfer like this from their parents. However, only 20% of bequestors plan lifetime giving, creating an expectation gap between parents and heirs.1 This disconnect may come from a lack of planning, poor communication or both. The unfortunate result is emotional friction from unmet expectations between family members. Bequestors who don’t plan on lifetime giving may also cause financial strain on the next generation.
A living inheritance provides a more fulfilling way to transfer wealth to family, but it may not be a good fit in certain situations.
Potential benefits:
Potential drawbacks:
A living inheritance can expand beyond cash and include gifts such as:
Some gifts may have different implications, such as taxes, loss of ownership and legal documentation when names change.
A living inheritance may be subject to a gift tax, generally paid by the giver. Gift tax does not apply to tuition payments to a college or university or medical expense payments to a provider. However, you may need to report larger cash or asset transfers to the IRS.
It’s also helpful to understand specific tax implications for gifting cash versus appreciated assets like stocks and real estate. Cash gifts don’t appreciate, but they do reduce the taxable estate when gifted during your lifetime.
Appreciated assets have a cost basis, or the original price at purchase, plus any fees. If an heir decides to sell the assets later, they may be required to pay capital gains tax on the difference between the selling price and the original price.
Speaking with a financial professional, tax professional or estate planning attorney can help you create a gifting strategy that makes the most sense based on these tax implications.
The 2026 lifetime gifting limit is $19,000 per recipient. You may need to file a gift tax return if any transfers exceed this amount for a recipient during the year. Gifts that exceed this amount can reduce the lifetime estate tax exemption of $15 million for individuals and $30 million for married couples.
Inheritance and wealth transfer planning conversations benefit when the whole family is involved. Learn why these conversations are important and how to start them.
Conversations give families an opportunity to align their expectations about inheritance and wealth transfer. Families that take time now to discuss plans, they can reduce assumptions, entitlement and conflict that can arise in the future.
The best time to have a wealth transfer conversation with family is early, before the bequestor(s) have passed away. Start broad by discussing values instead of specific numbers or assets. It’s also important to be transparent about intentions, not just disclose amounts. This can help family members understand the reasons behind the inheritance as well as any responsibilities that may come with receiving assets.
Key discussion points around inheritance may include:
If you’re not sure if giving a living inheritance makes sense for your circumstances, it’s helpful to evaluate your financial situation. Before you consider lifetime giving, ask the question, "Will gifting impact my financial stability?" Make sure you have enough savings for retirement, including increases in cost of living, planned spending and future healthcare and long-term care costs.
Your retirement goals, specific financial situation and tax considerations can all help you determine if lifetime giving is right for you.
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