If you’re lucky enough to build up wealth, it’s great to think about passing it on to your family or giving to charity. These are meaningful financial goals. But if much of your wealth comes from things like stock options, restricted stock, RSUs, employee stock purchase plans (ESPPs), or company shares, your planning may be more complex.

I recently hosted a webinar for myStockOptions.com with three experts who specialize in this area. In this article, I’ll share some of the key points and tips they gave.

There may be changes to tax laws soon, since the Tax Cuts & Jobs Act (TCJA) is set to end in late 2025 and Congress is working on a new plan. But the main strategies for estate and charitable planning won’t change, even if the TCJA does expire. The tips below will still be useful either way.

Basic Tools for Estate and Charitable Planning

One of the webinar speakers, David Haughton (Senior Corporate Counsel at Wealth.com), explained the main legal tools used in this kind of planning. In addition to having a will, you may also need trusts and to make sure your beneficiary choices are up to date.

Trusts

A revocable trust (also called a living trust) is like a container you can put your assets into. It helps you avoid probate and offers other benefits. Because it’s revocable, you can change or cancel it at any time while you’re alive.

In comparison, an irrevocable trust is one you cannot change or cancel once it’s been set up and funded. This type of trust may offer tax savings and protect your assets, but you need to be sure before creating it.

Unlike a will, which only works after you pass away, a trust becomes active as soon as you create it. You can place assets like company stock or equity grants (such as RSUs or NQSOs) into a trust—if your company’s rules and your grant agreement allow it.

Important: Make sure you understand the rules in your stock grants about transferring stock options or unvested shares to a trust or for donations. Some companies allow transfers while you’re alive, but only to certain family trusts. However, moving the assets to a trust does not change when taxes apply. The person who got the grant (like the employee or executive) will still pay taxes when the stock vests or the options are exercised.

Beneficiary Designations

Another estate planning tool is naming a beneficiary, which lets you leave assets to someone when you die without going through probate (the legal process for settling an estate). Haughton explained that for stocks, you can set this up directly with your financial institution. This is common with accounts like 401(k)s, IRAs, and brokerage accounts. Depending on your company’s stock plan, you might also be able to name a beneficiary for things like RSUs or stock options.

Important: When you later receive the actual shares (from RSUs, stock options, or ESPPs), the account that holds them may have its own beneficiary form. Your original designations for stock awards won’t automatically carry over to the brokerage account.

What Happens to Your Stock When You Die

Your company’s stock plan will say what happens to your stock awards if you die. Often, unvested awards are lost, but sometimes the plan allows them to keep vesting or even vest faster, and the time to use stock options may be extended. Your heirs or executor should understand the rules for each grant you’ve received.

Gifting and Transferring Wealth

Giving away money or stock during your life involves tax planning, as well as your personal money needs. Mani Mahadevan, CEO of Valur, talked about this in the webinar.

Each year, you can gift up to $19,000 per person ($38,000 with a spouse) without owing gift tax or using your lifetime exemption. If you go over, you reduce your lifetime exemption. If you go past the exemption, you owe gift tax. The tax rate on amounts above the exemption is 40%.

The current lifetime estate-tax exemption (in 2025) is $13.99 million per person or $27.98 million for married couples. But this could drop in 2026 if Congress doesn’t extend the current tax law. States may also have their own estate or inheritance taxes.

Should You Gift to Individuals or Trusts?

When you gift assets like stock, the person receiving them also gets your original purchase price (called the “tax basis”) and holding time. This strategy helps if the receiver pays lower capital gains tax than you would.

Important: If you gift to your children, be aware of kiddie tax rules, which may limit the tax savings.

Mahadevan said it’s often better to gift to a trust instead of directly to a person. Trusts offer tax savings, control, asset protection, and privacy.

What Kind of Stock Should You Gift?

Gift stock that you expect to grow a lot in value, because it will use up less of your exemption now than later when it’s worth more.

Gift high-basis stock (stock with little gain), and keep low-basis stock (stock with big gains). That’s because if you keep the low-basis stock until you die, your heirs get a step-up in basis, meaning they won’t have to pay capital gains tax on any appreciation up to the time of your death.

But if you gift it before you die, the recipient will have to pay capital gains tax on the full appreciation when they sell.

Donating Company Stock to Charity

John Nersesian from PIMCO discussed ways to donate company stock.

If you’ve held the stock for at least a year, donating it is better than selling it first and giving cash. You get a tax deduction for the full value of the stock and avoid capital gains tax.

Important: For incentive stock options (ISOs) and ESPPs, special holding rules apply. You must hold the stock for 2 years from the grant date and 1 year from the exercise or purchase. Donating early may cause extra taxes.

Ways to Donate:

Donor-Advised Fund (DAF):

A DAF is like a personal charity account. You donate stock, get the tax deduction now, and decide later which charities get the money. The fund can grow tax-free, and you can donate up to 30% of your adjusted gross income (AGI) per year, carrying forward unused deductions for 5 years.

Charitable Remainder Trust (CRT):

You give stock to a CRT, and it pays income to you or family for up to 20 years (or for life). After that, the rest goes to charity. You get a partial tax deduction, avoid some capital gains tax, and remove the asset from your estate.

Charitable Lead Trust (CLT):

This trust pays income to a charity for a set number of years, then the rest goes to your family. It helps reduce estate taxes and supports charitable causes.

More Advanced Estate Planning Strategies

Mahadevan also shared two trust types that help with wealth transfer, especially for startup founders or people with large estates.

Grantor-Retained Annuity Trust (GRAT):

With a GRAT, you give stock to a trust, get paid a fixed amount for several years, and any leftover value goes to your heirs without gift or estate tax. It works best when stock is easy to value (like public stock) and grows in value over time.

Intentionally Defective Grantor Trust (IDGT):

This complex trust removes assets from your estate but still treats you as the owner for income tax. You pay the trust’s taxes, letting the trust grow faster. This is a good strategy if you expect to exceed the estate tax exemption and want to pass assets to future generations tax-free.

Published: 15th May 2025

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