Should you gift company stock to children before you retire?

Step 1: Set the retirement cash floor

Start with your household monthly essentials: the items you know will not change. Mortgage or rent, property tax, insurance, utilities, groceries, medical premiums—write them down from your last year of paychecks. That number, multiplied by 12, is your annual spending floor. For most executives, it lands between $10,000 and $20,000 monthly, though some have higher bases.

Once you know that floor, count the months of liquid reserves you hold outside retirement accounts—savings, money-market funds, taxable brokerage accounts that are not company stock. Many retirees want at least 18 to 24 months of spending in cash or bonds they can access without selling stock or triggering a market-timing mistake. You may have more, or aim for less; the point is to know the number.

Next, take the confirmed payout date and amount of any deferred compensation, restricted-stock units that will settle, or stock-plan distributions. Do not guess. Call your employer's benefits department or plan administrator and ask for the election form or confirmation letter that names the dollar amount, the first payment date, and how often payments arrive. A $1.1 million deferred-compensation balance due to start three years from now is not cash today. One that starts in two months can be part of your first-year budget.

Step 2: Which lot carries what basis?

A brokerage account statement shows your total company-stock balance, but it does not tell you the adjusted basis of each lot. Basis matters because when you give a share, the recipient generally inherits your original cost basis, not the fair market value at the time of the gift. That inherited basis determines the recipient's future tax bill when they sell.

Request a detailed lot report from your brokerage or your company's transfer agent. It should list each purchase or vesting date, the number of shares acquired, the price or fair market value at that time, and the adjusted basis of each lot. For vested RSUs, match the vesting confirmation from your payroll or benefits page with the date and fair market value your employer used to calculate the wage income on your W-2; that figure is usually your cost basis. For employee stock purchase plan shares, get the offering price and purchase price per lot from the plan's record keeper.

Collect your most recent household budget or spending summary. Gather your employer's confirmation of the deferred-compensation payout balance, the payout start date, and the payment frequency. Print or download your latest brokerage statements for all taxable accounts so you can see exactly how many months of spending you can access without selling company stock.

Step 3: Does a stock gift change the tax bill?

A stock gift and a cash gift funded by a sale produce different outcomes, and neither makes the embedded gain disappear. Vernon, a 59-year-old chief operating officer at a public industrial manufacturer, and Judy, a 57-year-old retired pharmacist, illustrate the math. (hypothetical, round numbers) Vernon considers a $19,000 gift to an adult child before retiring in two years.

The lot is titled to Vernon alone, its fair market value is $19,000, and its adjusted basis is $4,000. Their household spending is $12,000 monthly, and Vernon holds $2.8 million in low-basis shares and $1.1 million in deferred compensation.

If Vernon gifts the shares directly, his child generally takes the $4,000 basis. When the child later sells the shares for any price above $4,000, the child reports the gain. The gift itself triggers no income tax for Vernon or his child. The $19,000 gift equals 1.58 months of their household spending ($19,000 ÷ $12,000), so the gift reduces his spendable stock position by that amount.

If Vernon sells the shares first for $19,000, he realizes a $15,000 gain ($19,000 fair market value minus $4,000 basis). That gain is taxable to Vernon at his long-term capital-gains rate. He then gifts the $19,000 in cash proceeds. The child receives a fresh $19,000 basis (the amount received). When the child later sells, the child reports gains only on appreciation above that $19,000 starting point.

The choice depends on whether Vernon needs to sell those shares anyway to fund retirement spending. If he does, the gain is realized either way. If he does not, a direct stock gift avoids the immediate tax bill but leaves the embedded gain with his child. Keeping the shares until death gives his child a step-up in basis to the date-of-death value, meaning no tax on the appreciation that occurred while Vernon held them—but it ties the shares to his estate and delays the transfer.

Step 4: Which 2026 gift and estate rules apply?

For 2026, the annual gift tax exclusion is $19,000 per recipient per donor. It is a transfer-tax limit, not an income-tax rule. The exclusion allows you to gift up to $19,000 per recipient each year without filing Form 709, the gift tax return.

The exclusion does not change the recipient's basis in the shares, does not offset any income tax owed on gains, and does not depend on how many other gifts you have made to that person.

If you are married and want to give $38,000 to one child in 2026 (using both spouses' exclusions), you generally elect gift-splitting on Form 709. The spouse who made the gift files the return, and the other spouse consents on it; a second return is usually needed only if the consenting spouse's half exceeds the exclusion. Confirm the mechanics and the filing deadline, generally April 15 of the year after the gift, with your CPA. A prior taxable gift can change the picture. Do not assume one spouse's gift is automatically treated as split between both.

The 2026 estate tax basic exclusion is $15,000,000 per person, set by federal law. That limit applies to your total taxable estate (assets, retirement accounts, life insurance proceeds), not to company stock alone. Gifts within the annual exclusion do not reduce your estate-tax exclusion, but large gifts outside the exclusion do. Kiddie-tax rules can apply to a child's investment income if the child is under 19, or a full-time student under 24, when statutory income thresholds are met. These thresholds change, so consult a tax professional for your child's specific situation.

Step 5: Get the receiving account title right

The most common slip is registering the recipient's account in a joint parent-child title when the intent is an outright gift to the child. If the account still names both parent and child as joint owners after the transfer, the gift date and ownership may be unclear, and the recipient's account could be subject to the parent's creditors or later estate issues. Correcting it requires new brokerage forms, a new transfer, and a revised record of when the gift was actually completed, which complicates annual-exclusion and Form 709 tracking. Before you transfer, ask your broker or transfer agent to confirm the receiving account registration (the child's name alone, or the child and spouse), the transfer date, and what paperwork they will send after the transfer is complete. Ask specifically whether the account is titled as the child intends—not as custodian, not as a joint account, not as a trust unless that was the plan.

Step 6: What changes with family and retirement timing?

For a single donor, test the $19,000 gift against one donor's exclusion for each recipient. If both you and your spouse own company stock and want to give to the same child, document each transfer separately and confirm with a tax professional whether gift-splitting applies. Do not assume a $19,000 gift from one spouse is automatically split; it is not unless both spouses elect it on Form 709.

A $19,000 gift represents different stakes depending on your net worth. For Vernon's $2.8 million position in low-basis shares, the gift is about 0.68 percent of that holdings before market changes—meaningful but not destabilizing. If your company-stock position is $500,000, the same $19,000 gift is 3.8 percent, which may be large enough to affect your spending plan or diversification strategy.

Two years before retirement, the calculus shifts. Vernon should preserve shares needed to bridge essential spending until his $1.1 million deferred-compensation payout is confirmed and begins. Giving away shares too early can force a sale of other lots at a bad time. Later in retirement, after two years of paychecks have arrived and your portfolio has rebalanced, a gift may be easier to fund because other assets already cover spending. The tax and recipient facts—their income level, their own capital-gains situation, whether they will hold or sell—still matter just as much.

• Ask the advisor which account funds essential spending until your first confirmed deferred-compensation payment arrives.
• Ask the CPA who will report the gift and what basis records need to accompany the transfer.
• Ask your stock-plan administrator or compliance contact about any transfer restrictions, blackout periods, or holding-period rules that could delay the transfer or affect timing.
• Call the plan administrator for the exact payout election you selected, the first payment date, and how often payments arrive after that.

Step 7: Bring this question to Scotia Wealth Management

After your monthly spending, accessible reserves, and actual deferred-compensation payout dates are mapped onto one calendar, the question becomes: which specific share lot can we give without forcing a sale later? Scotia Wealth Management works with executives by reviewing the full position—the company stock, the deferred-compensation election, the liquid accounts—and then naming the lot to gift and the lot to hold. If your existing payout election and spending plan already work, they usually stay in place.