Twice within the last 10 years, wealthy taxpayers have felt particular pressure to pare down the sizes of their taxable estates as a result of expected changes in the federal lifetime exemption amount (the amount that a taxpayer can gift or die with without incurring gift or estate tax). In 2012, taxpayers feared that the federal lifetime exemption amount would return to $1 million from $5,120,000, leading to a high level of year-end gift giving in 2012. In early 2013, Congress acted to extend the higher exemption. Now, taxpayers similarly fear that the generous almost $12 million federal lifetime exemption amount ($11.58 million for gifts made or decedents dying in 2020 and $11.7 million for gifts made or decedents dying in 2021) will be reduced (a popular expectation is that it may be reduced by half) as a result of the Democrats' control of the presidency, Senate and House of Representatives. Taxpayers who do not make use of the full federal lifetime exemption amount now fear that they may never have the opportunity to do so again.

Individuals who are flush with cash and marketable securities may find the decision to gift easy: They likely know how much they have gifted in the past and therefore how much remains of their exemption. They can easily match the amount of cash they are giving to their remaining lifetime exemption. Similarly, with marketable securities, the mean between the high and the low on the date of their gift is the amount of the exemption they use. If they want to reach their remaining lifetime exemption exactly, they can make up any difference with cash.

There may be reasons, however, why wealthy individuals may not want to use cash or marketable securities to make gifts. They may not have sufficient liquid assets to gift the full exemption amount and still live in the style to which they are accustomed. Alternatively, or in addition, available valuation discounts for difficult-to-value assets may allow them to leverage their remaining exemption by gifting such assets instead of cash or marketable securities.