Benjamin Franklin is famous for many things, including this observation: Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.
Death and taxes are two dreaded topics that go hand in hand. Their confiscatory logic is a continual source of frustration and creative planning as families search for legal ways to transfer more wealth without government intervention. Gift taxes were created by Congress and the IRS to discourage people from giving away assets before death to sidestep estate taxes. Those estate levies, sometimes called Death Taxes, apply to the total worth of an estate once the owner passes.
Dave Ramsey co-hosts The Ramsey Show, a nationally syndicated program devoted to personal financial advice. He recently addressed the topic of gifting when a caller wanted to give a large sum to his son-in-law for growing a business without triggering gift taxes.
The Caller’s Dilemma
Dave Ramsey’s syndicated radio show regularly gives financial tips to listeners seeking guidance.
The caller, a 62-year-old with a net worth of $10 million to $12 million, wanted to fund the expansion of his son-in-law’s musical instrument repair business. His proposed structure was straightforward: treat the initial $300,000 as a mortgage or property loan note, giving the son-in-law access to capital for purchasing or renting a larger workshop space. From there, annual cash gifts below the $19,000 exclusion threshold (or $38,000 for married couples using gift-splitting) could gradually pay down the loan balance, keeping the transfers off IRS radar year by year.
Ramsey’s Advice
Ramsey endorsed the caller’s approach and offered an alternative that is worth examining alongside it. His suggestion: apply the $300,000 directly against the federal lifetime estate and gift tax exemption, treating it as a declared gift rather than a loan. That route became considerably more attractive after the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, permanently raised the unified exemption to $15 million per individual (or $30 million for married couples) beginning January 1, 2026, up from $13.99 million in 2025. The exemption is indexed for inflation annually from 2027 onward, and the top marginal rate on amounts above the threshold remains 40%.
Several practical points flow from this framework. Using the Unified Estate Tax Credit during one’s lifetime reduces what remains at death, but the expanded $30 million combined baseline for married couples substantially widens the margin of safety for most high-net-worth families. At 62, the caller’s estate will likely continue to grow, yet the permanently enlarged threshold lowers the risk of outgrowing the exemption by tapping it early. Annual exclusion gifts of $19,000 per recipient (the figure for both 2025 and 2026) also benefit from inflation-adjusted increases over time, so the installment paydown strategy compounds in the caller’s favor. Ramsey further noted that loan forgiveness could be built into the caller’s will, and that a simple one-page loan record, initialed each year, satisfies the IRS documentation standard.
State-Level Tax Traps to Consider
Federal relief is meaningful, but state-level rules add a layer of risk that many families underestimate. Twelve states and the District of Columbia levy their own estate taxes, and five states (Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania) impose separate inheritance taxes. Iowa completed its phaseout of the inheritance tax for deaths on or after January 1, 2025, trimming that list from six states to five. State decoupling thresholds can start as low as $1 million in Oregon and $2 million in Massachusetts, so an estate worth $10 million to $12 million could owe no federal tax at all while still carrying significant state liability, depending on where the owner lives.
Takeaways and 24/7 Key Points:
Both the caller’s plan and Ramsey’s alternative rest on established tax mechanics and are structurally sound. One additional avenue worth exploring: if the son-in-law’s expansion eventually attracts outside investors or a buyout from a larger competitor, structuring the funding along venture capital lines could make sense. The vehicle for that is typically a Simple Agreement for Future Equity (SAFE) or a Convertible Promissory Note. The trade-off is that payments under those instruments would generate a 1099 tax event for the caller.
Equity instruments and SAFEs also carry a balance-sheet benefit. Keeping the original capital out of the workshop’s senior debt load improves the business’s prospects for commercial bank financing or institutional backing later. And if the funding converts to corporate equity, any distributions that follow are treated as qualified dividends, taxed at long-term capital gains rates rather than the ordinary income rates that apply to imputed interest.
Advanced Wealth Transfer Alternatives
For high-net-worth positions that exceed standard limits, other planning structures offer lasting utility. A Family Limited Partnership (FLP) lets parents consolidate business assets while retaining control as general partners and distributing non-voting limited partner interests to descendants. Because non-voting equity lacks marketability, valuation discounts typically reduce the taxable value of the transfer. Intentionally Defective Grantor Trusts (IDGTs) work differently but serve a complementary goal: they freeze asset values for estate purposes while allowing the grantor to cover the trust’s income tax liability out of pocket, effectively delivering an additional tax-free benefit to beneficiaries over time.
This article is intended to be strictly informative and opinion-based only, and not construed to be tax or financial advice. It is advised that professional tax and financial counseling be sought before undertaking any steps in that field.
Editor’s note: This pass adds the five specific states that levy an inheritance tax (Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania) and notes that Oregon and Massachusetts have the lowest state estate-tax exemptions at $1 million and $2 million respectively. It also corrects the description of Dave Ramsey’s program to its proper name, The Ramsey Show, adds that the $15 million OBBBA exemption is indexed for inflation from 2027 onward, and notes that the top marginal estate and gift tax rate of 40% is unchanged under the new law.
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