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Holiday Gift Giving - Financial Planning Tips for Leaving a Legacy

Posted by Shanna Tingom, AAMS® on Nov 13, 2018 6:19:00 AM

As you think about holiday gift giving, you might not think about financial planning tips for leaving a legacy to your heirs but it is an important consideration. When I work with my clients, we have three main concerns when preparing and implementing a financial plan – accumulation, retirement savings and spending, and legacy.

  • Accumulation is the money saved while you’re working and earning income.
  • Retirement is how you spend money once you’re no longer working.
  • Legacy is what to do with the rest of your savings.

Most time and effort is spend on accumulation and retirement because if you’re not working and saving, there is no financial legacy to leave to your heirs.

What’s your legacy?

Your legacy is the money that you give away. Giving can be more fun than spending while you’re retired as long as you’re confident you will have enough money to live on for the rest of your life.

There are several ways that you can give without creating a tax problem and sometimes you get a benefit in the process!

Annual Gift Exclusion: In 2018, you can gift $15,000 a year to anyone you like, without you or them having to pay gift tax. The numbers aren’t in for 2019 so check with us later. If you are married and your child is married, you and your spouse could EACH gift $15,000 to EACH of them, for a total of $60,000.

If you don’t want holiday gift giving to include tracking for gift tax purposes, make gifts for medical, dental, and tuition expenses for as many relatives (or friends) as you’d like if you pay the provider directly. These gifts don’t count towards any of the limits.

Charitable Donations: If you want to make a charitable donation, the limits above don’t apply. Consider a gift of appreciated securities. If you have held an appreciated stock or mutual fund for more than one year, you can donate those securities to a charity and receive a tax deduction for the fair market value of the securities, and eliminate any capital gains assessments on the future sale of the securities.

If you are considering gifting money, I’d suggest working with financial, tax and estate planning professionals to make sure it’s done correctly and with minimal tax consequences.

Whatever you choose for your legacy, a financial professional can help you make a decision that’s right for you.