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Caring For Generations

Estate Planning Need Not Come Adorned With a Bow

by | Mar 15, 2023 | Uncategorized

“Gifting stock to family members may lack the pizzazz of leaving a luxury car adorned with a bow in the driveway, but it’s a gift that can add value to their lives long after most other gifts have been forgotten,” New York law firm Grimaldi Yeung explains.

As we help our Geyer law clients define the legacy they want to leave to both their heirs and their community, we find that many of them own appreciated assets (real estate, shares of a privately owned business, mineral rights, artwork, collectibles, precious gems, and – appreciated stock.

Planning for owners of appreciated stock involves two primary considerations, it was pointed out in a Fidelity webinar for financial advisors on March 9 of this year:

  1. diversification (many clients’ portfolios are overly weighted in a single stock)
  2. tax planning

a) Direct donations of stock to charity allows “skipping over” any immediate taxable event.
b) In 2023, stock gifts of up to $17,000 each may be given to any number of recipients without first liquidating the stock and pay8ing capital gains tax.

A gift of stock can add value to the lives of recipients long after most other gifts have been forgotten, Think Advisor reminds planners, explaining that stock gifting rules apply to gifts of ETFs and mutual fund shares as well. The three gifting paths to consider include:

  1. Direct gifts of shares
  2. Gifts through trusts
  3. Transfers upon death

The “direction” of the transfer is part of the planning: High tax bracket parents can gift shares to children who are in a lower tax bracket; high-earning children might gift shares to parents who are retired and in a lower tax bracket. In some cases, the authors note, if the parents die while still holding some or all of the shares younger family members gifted to them, the shares can pass back to the children with the benefit of a step-up in basis, effectively wiping out taxes on the appreciation. In contrast, a gift of stock to a future college student may reduce that young person’s eligibility for needs-based financial aid.

At Geyer Law, we find annual gifts to be a highly useful estate planning tool for a broad range of clients. Even if you’re unlikely to ever have a large estate, we explain to clients, there’s a powerful case to be made for giving money to your loved ones while you’re still around. For annual gifts, there is no need to file any tax forms, and both the present value and any potential future growth of the assets are removed from the donor’s taxable estate.

Estate planning need not come adorned with a bow!

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