Q: Is it better to transfer stock to my children before my death or let it go into the estate?—Sandra, Kernersville, N.C. A: If your children have no immediate need for the money and your estate is small enough to avoid estate taxes, your best move is to hold on to the shares, says Charlotte, N.C. financial planner Cheryl J. Sherrard. By letting your children inherit the stock later instead of transferring it now, you’re helping them reduce the potential tax hit when they sell. The price you paid for your stock is known as your cost basis. That’s the number you use to determine your gain or loss on the investment and figure out how much you owe in capital gains taxes when you sell. When you pass stock to an heir as part of your estate, your heirs get a “stepped-up” basis. That means their cost basis becomes the value of the stock at the time of your death. So if you bought the stock for $100 and the price has reached $250 when you die, your heirs’ cost basis will be $250. If and when they chose to sell that stock, they will owe taxes only on any capital gains over $250, not $100. If you simply gift the stock to your children during your lifetime, you’ll also pass on your original cost basis. In this example, that means your heirs would owe taxes on any gains over $100. Any time you’re sitting on big profits, gifting that stock could cause your heirs to pay significantly more in taxes than they would if they’d received the shares via the estate. There’s one more consideration: If you expect your estate to be worth more than $5.34 million, which is when the federal estate tax kicks in, you may want to gift the stocks during your lifetime to reduce the size of your estate, says Sherrard. As an individual, you can gift up to $14,000 a year per person in 2014 without incurring any gift tax. A married couple can give up to $28,000 a year.