- When gifting, you should give what you want, to whom you want, when you want, and how you want and if possible save on taxes and expenses
- Families should look for financial planners and investment advisors
- Charitable giving is important within wealthy families as it instills the concept of giving back as assets are passed from one generation to the next and helps prepare heirs to be good stewards of wealth
According to Raymond James & Associates SVP Lisa Detanna, the process of estate planning when it involves a gifting strategy is to give what you want, to whom you want, when you want, and how you want and if possible save on taxes and expenses.
Financial planners and investment advisors help families develop an estate plan with the client’s trusted accountant and estate lawyer that utilizes current gifting laws to be efficient when passing assets to the next generation and the charities that the individual or families are dear to.
Generally, they start with a cash flow model and retirement plan whereby they determine if the client and their family have enough to live like their highest earning income years throughout retirement. Then, they run these future cash flow models out to age 110 with rich assumptions on the expense side of the ledger and conservative assumptions on the asset to err on the side of caution.
When there is a surplus, they work with a client and their families to identify if there are heirs that the family wishes to inherit the wealth at their passing and how much. It is not an “all or none” answer and is different for every person with no right or wrong answers. If there are not for profits or charities that are important to the client, they then look at developing a gifting strategy that fits into the client’s wishes and maximizes the tax efficient benefits under current gifting laws.
There are 3 options in estate tax: Avoid the tax: give assets away before death; Pay the tax: sell assets or transfer assets; and Insure the tax: use discounted dollars to pay the tax, preserve assets and estate.
Like the slogan “death and taxes are inevitable,” estate taxes are due in cash within nine months of death and they are progressive.
Currently, one can gift US$14,000 maximum per beneficiary per year (called annual gift) without filing a gift tax return or it eating into one's lifetime gift credit or estate tax exemption at death. In addition, one can pay educational expenses or medical expenses if directly paid to the provider. This is the simplest way to make a gift and many charities will accept highly appreciated stocks, bonds or real estate which can be tax friendly to the grantor.
If one is fortunate enough to have over the exemption gifting amount, this is where the estate planning begins. One can gift to bonafide 501(c)(3) charities the overage of the exemption amounts and if they utilize some estate planning techniques they may be able to get some tax benefits on those gift that they can benefit from while they are still alive. Of course one can also gift with any level of wealth and these gifts can be tax efficient. Always consult your accountant, financial advisor and attorney prior to making the gift so there can be a discussion on how best to do it.
"Charitable giving is important within wealthy families as it instills the concept of giving back as assets are passed from one generation to the next and helps prepare heirs to be good stewards of wealth. Involving heirs early on to prepare them to be able to handle how to help others and utilize the wealth as well as finding purpose in life by helping others through philanthropic efforts is key for a family in creating a meaningful legacy. In fact, there are a wealth of gifting strategies and changes in tax laws or regulations may occur at any time. Be sure to discuss any tax or legal matters with the appropriate professional. " Detanna concludes.