‘Tis the Season for Year-End Gifting

It’s that time of year again.

With the clock running down on 2018, now is the time to contemplate gifts to loved ones.

This year, you can give up to $15,000 per family member or friend ($30,000 if you’re married) without counting against your lifetime gifting exclusion of $11.2 million ($22.4 million if you’re married).

Whether it’s a 529 plan for your grandchild or stocks for your daughter, there are several strategies to consider.

The Gift of Learning

A 529 account might not elicit wide-eyed wonder in your grandchildren, but it’s a gift that will last a lifetime.

These college savings plans are investment accounts that are allowed to grow, and eventually be withdrawn, tax-free if used to pay qualified education expenses.

One benefit of funding a 529 plan is that you can contribute up to five years’ worth of the allowed annual gift exclusion—a total of $75,000 (or $150,000 if you’re married)—into the account in a single year with no tax implications.

While you would need to wait five years between gifts to the same beneficiary to avoid gift tax implications, this “front-loading” gives more money the opportunity to begin growing tax-free earlier.

The Gift of Medical Care

Life can be unpredictable. Perhaps your non-dependent child needed an emergency appendectomy this year and didn’t have the funds to cover the cost outright.

If you make payments directly to a medical provider, doctor, or hospital (as opposed to your child), your gift does not count against your annual or lifetime gifting exclusion.

This means you can cover the cost of medical care and give your loved one a gift up to the allowed gift exclusion limit—a generous one-two gift that can make getting well a bit easier.

The Gift of Investments

Your grandkids might not find stocks and bonds as alluring as those new AirPods, but they’ll come to appreciate the value of a good investment.

Gifting securities can be a little complex because gift value is based on current value, not initial purchase price. And the person receiving the gifted securities will pay tax, at their tax rate, on any appreciation since initial purchase once the securities are sold.

But therein lies the benefit of gifting securities: When you gift appreciated stock to family members in a lower tax bracket, the total tax bill upon sale could be much lower than had you sold the stock and gifted the cash.

The Gift of a Trust

If you want to gift large sums of money to minors or adult children but aren’t sure they are financially ready to handle such a gift, a trust fund may be appropriate.

An irrevocable trust allows you to reduce the value of your estate for tax purposes by gifting money in trust instead of outright and includes language that instructs the trustee how a gift may be used or invested for the child’s benefit.

This type of gift is the most complex of the examples listed here, so obtaining the advice of a qualified estate attorney is important.

Making the Call

We can help ensure your giving, whatever strategy is chosen, is consistent with your values and long-term financial plan.

Please contact us to learn more about the best giving options for you and your family.

 

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