When the stock market takes a dip, most people instinctively feel anxious about their portfolios—and understandably so. But here’s something many investors overlook: a market downturn can actually open the door to powerful estate planning strategies.
One of the most effective? Gifting depressed. Making gifts to the next generation during a market slump can help you pass on more value with fewer tax consequences.
Let’s break it down.
What Are “Depressed Assets”?
“Depressed assets” are investments (like stocks, mutual funds, or real estate) that have temporarily dropped in value due to market volatility. You may be holding onto them hoping they’ll bounce back—and chances are, they will.
But if you’re already planning to make a gift, now might be the perfect time to do it. When you gift an asset while it’s down, the IRS values the gift at its current (lower) fair market value—not what it was worth last year or what it may be worth next year.
Why Gifting in a Down Market Can Be a Smart Move
Gifting in a down market allows you to transfer more wealth to the next generation while using less of your lifetime exemption.
In 2025, individuals can give away up to $13.61 million over their lifetime without paying federal gift or estate tax. This is known as the lifetime gift and estate tax exemption.
By gifting when values are low, you use up less of that exemption—which means you can give more over time.
Here’s an example:
If a stock was worth $100,000 last year but has dropped to $65,000, gifting it now uses just $65,000 of your exemption.
When the stock recovers, that growth happens outside your estate, free of additional gift tax.
Once the asset is out of your hands, any future increase in value belongs to the recipient—not you. That means you’ve successfully moved appreciation out of your taxable estate, potentially reducing future estate taxes.
This is especially useful for:
- Gifts to children or grandchildren
- Contributions to irrevocable trusts
- Long-term wealth transfer goals
One Important Tax Note: Cost Basis Transfers With the Gift
When you gift an asset, the person receiving it also inherits your original cost basis. That means if they later sell it, they may owe capital gains tax on the full increase in value since *you* purchased it.
This isn’t necessarily a downside—it just needs to be factored into the overall strategy, especially if the recipient is in a higher tax bracket or may need to sell the asset soon.
Final Thoughts: Don’t Let a Market Dip Go to Waste
Market downturns can feel like a setback—but with smart planning, they can actually be a golden opportunity to make meaningful gifts, reduce future taxes, and set your loved ones up for long-term financial success.
Ready to Explore Gifting Strategies?
Our team can help you figure out if gifting assets during a market downturn makes sense for your personal goals—whether you’re planning for your family, a trust, or future care needs.