It may be important to you that your family and the charities in which you believe, benefit from your success. Giving lets you practice your core values. However, for your giving to be meaningful, you need a plan to maximize your generosity.
Kiplinger’s recent article titled “Gifting: 3 Areas You Shouldn't Overlook” states that there are many things to think about before gifting, and although there are benefits to estate planning, there are other issues to consider.
Think about your gifting goals. Any amount that is given to a family member, friend, or organization will no doubt be treasured, but ask yourself if the recipient really wants or values the gift or it only satisfies your personal goals.
As far as giving to a charity, you should be certain that your donation is going to the right organization and will be used for your intended purpose. Your giving goals, objectives, and motivations should match the recipient’s best interests.
If gifting straight to a family member is not a goal for you now, but you want to engage your family in your giving strategy and decision making, there are several gifting vehicles you can employ, like annual gifts, estate plans, and trusts. Whichever one you elect to use will let you place an official process in the works for your strategy. Family engagement and a formalized structure can help your gift make the greatest impact.
There is more to gifting than just determining who and how much. It’s critical to be educated on the numbers in order to maximize your gift value and decrease your tax exposure.
You can now gift up to $11.58 million to others ($23.16 million for a married couple) while alive without any federal gift taxes. The amount of gift tax exemption used during your life also decreases your federal estate tax exemption. You should also be aware that this amount will fall back to $5 million (and $10 million for a married couple) indexed for inflation after 2025 unless renewed.
If you transfer your wealth to heirs and beneficiaries early and let it compound over time, you can avoid significant estate taxes. In addition, note the annual gift exemption because, with it, you can gift up to $15,000 ($30,000 as a married couple) to anyone or any kind of trust every year without taxes.
An experienced estate planning attorney can help you create a giving strategy to achieve success for you and your beneficiaries.
Reference: Kiplinger (March 19, 2020) “Gifting: 3 Areas You Shouldn't Overlook”