Tax Free Giving

Bigstock-Money-Box-2428389While many people would prefer to wait until after death to give an inheritance to their heirs, others might prefer to give while they are still alive to see the benefits of their gifts. There are ways to give money now and avoid any tax consequences.

Traditionally, wealth is transferred from one generation to the next through inheritances. However, if an elder family member has more money than he or she needs and younger family members are in need, then it is often preferable to transfer the wealth while the elder person is still alive. In fact, that affords the older generation an opportunity to witness the impact of their generosity.

When it comes to giving methods, there are many ways to skin the cat. This was the subject of a recent article in the Columbus Dispatch, "Guide to Life: Pros and cons of leaving inheritances to relatives." Nevertheless, some of those giving methods are more tax savvy than others.

The article mentions three such ways:

  • Cash – A single person can give an individual $14,000 a year without tax consequences for the person receiving the gift. A married couple can give $28,000. This amount can be given to as many people as desired so long as no one individual is given more than the limit by the person giving the gift. Moreover, the giver must be sure not to have given more than his or her lifetime limit on "taxable" gifts (i.e., gifts made in excess of the annual gift exemption). That number is currently $5.43 million for a single person and $10.86 million for a married couple.
  • Student Loans – When you pay off a loved one's student loan debt, that does not count against the $14,000 annual limit on gifting. Caveat: This only works if the money is given directly to the educational institution.
  • College Savings – Money invested in a 529 college savings plan accumulates tax free and can be withdrawn tax free for qualified expenses.

These are just a few of the ways to make tax savvy gifts. Your estate planning attorney can help you with other techniques to benefit your family and favorite charities.

For more information about estate planning, please visit my estate planning website.

Reference: Columbus Dispatch (October 16, 2015) "Guide to Life: Pros and cons of leaving inheritances to relatives"


Grandparents Paying for College / York, PA

MP900404926College is extremely expensive for most families. When tuition, room, board, books and other miscellaneous expenses are all added in the total cost of a college degree is often in the six figures. Not wanting to saddle their younger family members with student loan debt, many families are struggling to find affordable ways to meets these expenses themselves.


It used to be normal for parents to pay their children's way through college or for the children themselves to work their own way through. However, the cost of a college education is now so high that it is almost impossible for students to make enough to pay for it with part-time jobs. Many families  struggle enough to meet their current needs that they just do not have enough to pay for their children's education. Increasingly, paying for college education has become something that grandparents want to do. They have already earned their wealth and are in a better position than the parents to pay for college.


A recent Reuters article examined how grandparents can pay for their grandchildren's college education while getting a tax benefit for themselves. The article, titled YOUR PRACTICE-Selling grandparents on the perks of 529 college savings plans,”suggests a 529 college savings plan. This unique account can be used to contribute more than the yearly gift tax exemption into an account that a grandchild can later use for educational expenses. The accounts are not perfect as they could make a grandchild ineligible for financial aid.


Paying for college is difficult, but grandparents who want to do so have several options. A 529 plan is one of them, but in some cases a more traditional trust is a better option. The key is to talk to an estate planning attorney about your best options, in conjunction with your financial advisor. Different families have different needs. Your attorney and financial advisor team can help grandparents sort through the options to come up with the best solution for their needs.


For more information about estate planning, please visit my estate planning website.


Reference: Reuters (July 18, 2014) YOUR PRACTICE-Selling grandparents on the perks of 529 college savings plans

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