Financial Planning around Gifting

Gifting and Year-End Gifting Financial Planning image for family business investment advisers McRae Capital Management.
Accumulating assets over a lifetime can help you live a comfortable lifestyle. It can also enable generosity, if you are wise enough and lucky enough to accumulate more assets than you need. Gifting is a way to pass assets to family members or to a charity, and if done well, can also help your tax situation. Here are a few of the basics, but make sure to speak to a McRae adviser to discuss your gifting options, as there can be many complicating factors, particularly for larger gifts.
One of the most common and easiest ways to pass assets to friends or family is through the Annual Gifting Exclusion. In 2021, any individual can give up to $15,000, in cash and/or securities, to any other individual, free of any gift taxes. You can give this annual amount to as many different people as you wish: For example, a husband and wife could each give $15,000 to each of their three children and their five grandchildren in 2021, for a total of 2 x 15,000 x 8 = $240,000, and they could give the same amount the following year.  In some cases, other exemptions from federal gift taxes can be claimed for certain educational and medical expenses; contact a McRae adviser for details.
For larger gifts (to help pay for real estate, for example), you can avoid gift taxes if you use them against your Lifetime Gift Exclusion. In 2021, everyone is allowed to gift $11.7 million in total over their lifetime, free from federal gift taxes (which kick in at higher amounts.) These lifetime gifts include a variety of giftable assets, including cash, securities, business interests, and real estate, and can occur during your lifetime. Large gifts may involve trust accounts (learn more here). And understand that while these large gifts may be exempt from federal taxes, state gift taxes may apply, so make sure you understand the gifting laws specific to your state when organizing your strategy.
It’s also possible to gift money, securities, and other assets to qualifying nonprofit organizations we hold dear to our hearts. If you qualify, current tax law makes charitable contributions from an IRA extremely attractive in 2021—we’re happy to discuss the details. A few tips:

  • Always consider gifting appreciated property, such as stock: You get the full amount of the gift, and any capital gains will be transferred to the charity and not impact your own taxes negatively.
  • Community Foundations and Donor-Advised Accounts are options that can allow you to take a relatively large charitable deduction this year, and spread your gifting over a longer period of time.

These are a few of the many, many specifics around gifting. If you’re considering disbursement strategies for assets, don’t hesitate to reach out to a McRae Capital Management adviser for a free consultation. If you’re interested in reading more, please read the section on Gifting in our Estate Planning Commentary.
McRae Capital Management brings decades of long-term investing experience to bear for families, individuals, and corporate clients. If you have questions about anything, from general family budgeting to complex tax issues, from divorce to inheritance, from planning for college to planning for retirement and everything in between, just download our brochure or give us a call at 973-387-1080.


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