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As I understand it, in principle a husband and wife can each give $10,000 annually to their child and their child's spouse (for a total of $40,000).

I agree so far.

Can the husband and wife transfer a joint mutual fund of $40,000 to the joint ownership of their child and child's spouse. Or is it necessary to sell the fund, give cash, then have the child and spouse set up a new fund?

Certainly the husband and wife can elect to use gift-splitting, so that the titling of the asset gifted can be in either name or in both names. So I don't see any need to sell the fund before making the gift. And once a gift is received, an adult child can own that gift jointly with their spouse. So again, I don't see a need to set up separate accounts by the recipients.

Maybe someone else will have another point of view.

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