I want to gift mutual fund shares to adult children. How do I, and they, avoid taxes?

[vaitamarii]

I want to gift mutual fund shares to adult children.  What's a good way to do this to avoid taxes for me and them?  The shares have appreciated greatly over many years.

[Anonymous_ · Accepted solution]

" What's a good way to do this to avoid taxes for me and them?"

You should really consider an in-person consultation with an estate planning professional, particularly if you have a substantial amount of assets. 

Regardless, your children will take your basis in the shares so they will almost certainly have to pay capital gains taxes in any event if they sell the shares.

You can gift up to $15,000 to each child this year, without having to file anything, since that amount is the annual exclusion for 2018. If you gift more than that to each child, you will have to file a gift tax return but will not have to pay any tax unless you exceed your lifetime estate and gift tax exemption (which is currently $5.6 million). 

See https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-tax...

[TaxGuyBill]

One example for the reason for the suggestion for going to an Estate Planning Professional is that if you keep the mutual funds and your children INHERIT the mutual funds after you die, the sale could then potentially be tax-free.