Imagine any of the following scenarios: (1) the markets take a tumble, and your portfolio is down; (2) a sector your business operates in or around has experienced a significant downturn; or (3) the world’s immediate economic forecast is uncertain. All of these situations are arguably happening (although depending on the day, the story can vary) and they create a unique opportunity for gifting.

Timing is everything for gifting purposes. If you complete your gift and apply your gift tax exemption to a transfer, the gift will be worth its fair market value at the time of transfer, rather than the value of what you paid for it.

Depressed Asset Values Mean Increased Gifting Efficiency

How does it make sense that a down economy can help you gift more? It comes down to valuation. In a bear market, you can get a depressed valuation, allowing you to gift more assets for less exemption. Your assets—like stocks, bonds, or real estate—can fluctuate in value daily due to market conditions. Similarly, you can impact your company’s value by forming an LLC and contributing these assets tax-free, resulting in a temporary value decrease.

Determining the worth of these assets can be challenging, but you can pay for a qualified appraisal or use a current sales price from an unrelated person. Additionally, you could take “valuation discounts” for a lack of marketability, given your LLC is less attractive and exchangeable for anyone looking to invest.

Strategic Structures and Valuation Discounts Can Supercharge Your Plan

How does it work exactly? In an environment where asset values are temporarily suppressed, the strategic use of valuation discounts becomes even more compelling. When structured appropriately, your gift of an interest in an LLC or family limited partnership (FLP) can receive discounts for lack of control and lack of marketability—sometimes totaling 20–40% or more in valuation reduction. That means if the underlying assets are worth $1 million, applying these discounts could bring the gift tax value of your transferred interest down to $600,000 or $700,000. You’ve now transferred more underlying value while using less of your lifetime gift exemption.

This strategy is not just about seizing opportunity—it’s about maximizing efficiency. When markets rebound—and history suggests they always do—your gifted interests appreciate in value inside the hands of your beneficiaries, outside of your taxable estate. That growth is no longer subject to estate tax, which can reach 40%, not including potential state-level estate taxes. In other words, the more you gift while values are down, the more future appreciation escapes taxation.

Can This Apply to You?

It’s worth noting that this kind of planning isn’t limited to ultra-wealthy families or those with operating businesses. Anyone with a meaningful portfolio—stocks, real estate, or a family-owned LLC—can take advantage of this market environment. The tools are available. The key is taking proactive steps.

These techniques do require precision. Valuation reports must be properly substantiated by qualified appraisers, and legal structures—LLCs, FLPs, trusts—must be drafted and managed with care. But when implemented correctly, they can achieve long-term tax savings and enhance intergenerational wealth transfer in a way that is simply not possible during economic booms.

Now may be the right time to revisit your gifting plan or start one. Downturns create discomfort—but they also create leverage. If you’ve been waiting for the right time to take advantage of the exemption or maximize the value of your gifts, the market has given you the perfect opening.

THIS POST IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN TAX OR LEGAL ADVICE.