She Wanted to Gift $38K to Her Sister Without Wrecking Her Plan

Betty is 68, retired, and has always been generous.

She gives to her favorite charities through her donor-advised fund. She helps family when it matters. And this year, she wanted to gift money to her sister—right up to the annual exclusion limit of $19,000 per person (so $38,000 total from her and her husband).

Simple enough, right?

Not quite.

Betty's first instinct was smart: "Can I just send this from my donor-advised fund?"

Unfortunately, no.

DAFs are powerful tools for charitable giving, but they only work for 501(c)(3) organizations. Gifts to family members—no matter how generous or well-intentioned—don't qualify.

So Betty was back to square one.

She had the money. She wanted to give it. But she didn't want to drain the cash reserves she needed for her retirement plan. And she definitely didn't want to sell investments and trigger a huge tax bill just to fund a family gift.

Here's where most people get stuck.

They think: "I'll just sell some stock, take the cash, and write a check."

But Betty had a big problem with that approach.

She'd received restricted stock units (RSUs) during her years as a director at a public company. The stock had grown significantly—which was great for her net worth—but it also meant she was sitting on substantial unrealized capital gains.

If she sold $38,000 worth of that stock to fund the gift, she'd owe capital gains tax on the appreciation first. Depending on her tax bracket, that could mean losing thousands of dollars to taxes before she even made the gift.

It's like filling a bucket with a hole in the bottom—you lose money on the way to your goal.

Plus, her portfolio was already too heavily concentrated in that single stock position. She needed to rebalance anyway, but selling it all at once would create a massive tax burden.

Here's what we recommended instead:

Gift the appreciated stock directly to her sister.

Not cash. Not after selling. The actual shares.

This strategy let Betty accomplish four things at once:

Now, her sister will eventually need to sell the stock and pay capital gains tax on the appreciation. That's true.

But here's the thing—her sister still comes out way ahead.

One of my favorite quotes applies here: "If you're scared of taxes, give me your income, and I'll be happy to pay the tax bill."

Her sister is receiving a $38,000 gift. Yes, there's a tax bill attached. But she's still walking away with far more than she had before. That's a win.

Betty made the gift.

She didn't drain her cash reserves. She didn't trigger an unnecessary tax bill. And she took a meaningful step toward rebalancing her portfolio into something more prudent for retirement.

Her sister received the stock, sold it when it made sense for her, and gladly paid the tax bill on a gift she otherwise wouldn't have had.

Betty got to be generous without compromising her own financial security. That's the outcome that mattered most.

If you're charitably inclined or planning to gift money to family, the source of that gift matters just as much as the amount.

Cash isn't always the best answer—especially if you're sitting on appreciated assets that need rebalancing anyway.

The smartest retirees don't just ask, "Can I afford this?" They ask, "What's the most tax-efficient way to do this?"

And that question changes everything.

One more thing – I read every single reply to these emails.

I use your responses to guide my content, so it might become next week’s deep dive.

Happy retiring,

Josh Rendler, CFP®

_{For privacy, names and minor details were changed. Education only, not advice. Consult your professional(s).}