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Caring For Generations

‘Tis the Gifting Season

On Behalf of | Dec 15, 2021 | estate and tax planning, Estate Planning

The ancient tradition of gift giving can be traced as far back as cavemen, explains. In fact, gift-giving made other cavemen respect the giver because the fist suggested success and power. In fact, gift giving is a fundamental part of human behavior, the authors assert. While the nature of gift giving may have changed throughout the years, and may differ across cultures, the reasons why people give gifts have remained pretty much the same:

  • expressing gratitude to those who are important to us in some way
  • expressing affection and heartfelt feelings towards people we care deeply about.

Charles Schwab’s Hayden Adams reminds givers that “when you give assets to someone – whether cash, stocks, or a car – the government may want to know abut it and may even want to collect some taxes.” Adams names three reasons why timing matters, and why “it’s better to give assets to your loved ones while you’re still alive rather than after you pass away.”

  1. Recipients benefit from your gifts right away, and you have the enjoyment of seeing your gifts improve their lives.
  2. Those gifts grow in value in their hands, rather than in yours, which helps reduce your taxable estate.

What about the government “wanting to know about it?” You can avoid taxes in three ways, the American College of Trust and Estate Counsel explains::

  1. Using the annual gift tax exclusion ($15,000 in 2021, $30,000 for spouses “splitting gifts” (this amount increases to $16,000 in 2022)
  2. Using the lifetime gift and estate tax exemption (currently $11.7 million) to make gifts during your lifetime beyond the annual gift tax exclusion
  3. Making direct payments to medical and educational providers on behalf of a loved one (there is no limit on these gifts if the funds are payable directly to a medical or educational institution)

At Geyer Law, one understandable concern often voiced by clients is whether a young person receiving a substantial gift is ready and able to manage money or other assets responsibly. Trust planning is often the answer, setting rules in the trust for how assets are invested and distributed. Tuition payments made directly to the college, of course, can greatly benefit a child without giving that child direct access to the funds.

For our clients who own rapidly growing businesses, their challenge is often finding ways to gift interests in the business (to individuals or to charities) without relinquishing too much control.  Gifts of an ownership stake in a company can be accomplished with a direct gift or a gift to an irrevocable trust, and might benefit either a family member or an employee. For high-net-worth families, transfer planning becomes a key part of our work.

When it comes to estate planning, remember – ’tis the gifting season!

– by Cara Chittenden, Associate Attorney at Rebecca W Geyer & Associates