Many of our Wealth Management clients and families make a regular practice of gifting financial assets such as cash and appreciated securities to loved ones and special causes that reflect their personal values and interests. We are delighted to help guide client conversations and explore the potential of a wide range of gifting options. Tax laws and market cycles change and evolve over time. So do the needs of your family and individual preferences about charitable recipients. One constant, however, is the desire of benefactors to support the people and charitable endeavors they care about. Below we have shared our thoughts on several gifting-related topics.
Unrestricted Lifetime Gifts
The IRS allows you to make unrestricted lifetime gifts that count against what you would otherwise leave to your loved ones at death. With federal estate tax shelter amounts facing potential reduction in the near term from historically high levels, if people you care about might make better use of gifted assets today, you might consider accelerating a transfer of wealth to them now versus later.
Marital/Family Trust
If you and your spouse still wonder about the potential impact of estate taxes when you’re gone, your estate planning attorney can walk you through the basics of Marital/Family (or “A/B”) Trusts, which remain a durable mechanism for taking the fullest advantage of how much any one person can shelter from estate tax. Let us know if we can facilitate a conversation for you on that topic.
Annual Federal Gift Tax Exclusion
Meanwhile, don’t overlook the continuing value of annual exclusion gifts, which remain at the level of $15,000 from any one person ($30,000 from a married couple) to any other individual. This remains an appealing, “frictionless” way to convey financial support to people you care about, with no taxes owed on either side.
Charitable Gift Funding
If you have charitable gifting recipients in mind, two of the more popular means of funding those gifts remain annual required minimum distributions (RMDs) from IRAs and donating highly appreciated securities from your taxable portfolio in lieu of cash. Gifting RMD amounts up to $100,000 directly to qualified 501(c)(3) organizations from an IRA removes the tax that would otherwise accrue to the account owner if she took the RMD herself. Making Qualified Charitable Distributions (QCDs) allows clients to make charitable contributions without taxes and make the most out of the standard deduction for their tax returns (i.e., clients don’t have to clear the standard deduction hurdle to benefit from the charitable contribution). And gifting securities with big unrealized gains gets that potential capital gain tax out of the picture if the assets were eventually sold in the taxable account.
Higher Education
Separate and apart from lifetime gifts and annual exclusion gifts to children and grandchildren, you can pay tuition or direct educational expenses (and medical expenses, too, for that matter) without limit and without affecting the lifetime exemption if the payment is made directly to the provider. Alternatively, 529 plans and Coverdell IRAs remain popular vehicles for making contributions on behalf of grandchildren and/or nieces/nephews.
Additional Gifting Techniques
With the help of your tax and estate planning professionals, you can explore a range of more sophisticated gifting techniques, including private loans among family members, donor advised funds, private family foundations, and a variety of trusts that combine charitable and individual beneficiaries.
We welcome the opportunity to speak with you about your gifting objectives and would be happy to include your tax and estate planning experts, so together we can craft a customized solution for your gifting objectives.
Last updated July 2021. This information has been prepared solely for informational purposes and is not intended to provide or should not be relied upon for accounting, legal, tax, or investment advice. The factual statements herein have been taken from sources we believe to be reliable, but such statements are made without any representation as to accuracy or completeness. These materials are subject to change, completion, or amendment from time to time without notice, and Segall Bryant & Hamill is not under any obligation to keep you advised of such changes. This document and its contents are proprietary to Segall Bryant & Hamill and no part of this document or its subject matter should be reproduced, disseminated, or disclosed without the written consent of Segall Bryant & Hamill. Any unauthorized use is prohibited.