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‘Tis the Season for Giving

Annie Rogers

Christina Knopke

In this episode, Attorneys Chrissy Knopke and Annie Rogers discuss the various ways you can make gifts to your family and causes that you care about. And while the rules say paying a family member’s medical expenses as a gift is permissible – paying for their cosmetic surgery is not. Bah, humbug.

Wishing happy holidays to all our listeners!

Read more about gifting rules:

Read more about leaving a charitable legacy:

Learn more about gifting to 529 education savings plans:

A Matter of Trust, hosted by Creative Planning Attorneys Annie Rogers and Christina Knopke, is a thoughtful, informed discussion about ideas, trends and developments in estate planning. Our mission is to educate and inspire people to make better financial choices through knowledge, tools and strategies that ensure a more prosperous future.

Have questions or topic suggestions? 

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Chrissy Knopke: Welcome to Creative Planning’s A Matter of Trust. I’m Chrissy Knopke, and I’m here with my friend and colleague, Annie Rogers. We’re both estate planning attorneys at Creative Planning, and we’re going to talk about some fun stuff today.

Annie Rogers: Yeah. It’s the season of giving, so we’re going to talk about gifts, making gifts. The first thing we want to cover, and we’ve talked about this before, is the estate tax exemption. So when you’re making gifts, for clients that have high net worth, they may have taxable estates, this is something that they’re always mindful of. Back in 2017, the Tax Cuts and Jobs Act doubled what the estate tax exemption was to make it $10 million rising with inflation through 2025. So today, the exemption is $11.7 million.

Chrissy: So that kind of gets us right into the next way to gift, which is annual exclusion gifting. So any one person can give $15,000 to anyone. They could give it to 10 people, 12 people, 15 people. The amount doesn’t matter of people they’re giving it to. But if you have $15,000 to a single person or $30,000 as a married couple to anyone, it does not reduce your lifetime exemption, so-

Annie: You do not have to report this to the IRS.

Chrissy: No gift tax concerns, so you can give that amount to any person or people. And also, in addition to that, you can pay for tuition directly to an institution. You can pay medical bills for those people. So that can be a way of gifting and reducing your estate at the same time.

Annie: And for medical bills, that also needs to be paid straight to the hospital and it only can be for medically necessary things, not-

Chrissy: So, no cosmetic surgeries allowed.

Annie: Right, yeah, that’s not going to be covered, but medically necessary things. And there are ways you can do this, several different ways. So, one is through an irrevocable trust.

Chrissy: Which would allow you to kind of control how that person you’re gifting that $15,000 to every year is going to use those funds. So maybe if they’re a minor, or they’re just not very good with money, you can kind of set those provisions.

Annie: Right. A second way is putting money into a 529 account. So if you have grandkids that you want to help make sure their tuition is paid for, you can gift that money into that 529 or also a Uniform Transfer to Minors Act (UTMA) account. So it’s a custodial account that you could still manage that they don’t get until maybe they’re out of college or launched sometime in their 20s and hopefully making better financial decisions. And that money could also be used for college or other things they might need.

Chrissy: And something to keep in mind with 529 plans, and you’ll want to talk to your Creative Planning wealth manager about this, is that you can front load those. So not just $15,000 a year. You can front load it with kind of five years of contributions, so that’s something to discuss, the ability to do that, when gifting into a 529 plan.

Annie: And then last, but not least, is charitable giving. So if you are charitably minded, you can always make some gifts to charities or a donor-advised fund (DAF) that could later make distributions to charities that are important to you, and then get that charitable deduction that is nice to have on your taxes for 2021.

Chrissy: Thank you for joining us and happy holidays.

Annie: Yeah, happy holidays.

Disclosure: This commentary is provided for general information purposes only and should not be construed as investment, tax, or legal advice. Past performance of any market result is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed. This commentary and the information provided may be considered advertising in some jurisdictions under the applicable law and ethical rules. The determination of the need for legal services and the choice of a lawyer are extremely important decisions and should not be based solely upon advertisements or self-proclaimed expertise. No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.

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