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A Gift Today That Can Help Them Tomorrow

November 30, 2018

Graduate being hugged

Are you hunting for gift ideas for the kids or grandkids? For many people, witnessing the impact of their financial gift is important. Making gifts to family members while you're alive lets you do just that.

How much can you gift?

You can gift up to $15,000 per year (or $30,000 per couple via gift splitting) to any individual tax-free. This amount is known as your annual gift tax exclusion amount. You also may gift up to $11.18 million (2018 amount) during your lifetime above the annual gift tax exclusion amount. Your spouse has the same $11.18 million amount to use during his or her lifetime. Once you reach this limit, however, you’ll owe gift taxes on any additional gifts.

You have a several strategies available to help you distribute your assets:

  • Appreciated assets – By gifting an appreciated asset (one that has grown in value), you avoid paying capital gains tax on the difference between what you could have sold the asset for and what you paid for it (known as your cost basis). However, if the gift is more than $15,000 ($30,000 for married couples via splitting gifts) per year, you will need to use a portion of the $11.18 million exclusion. Also, if the beneficiary sells the asset, he or she generally will be subject to the capital gains tax.
  • Education and medical contributions – Direct payments to a qualified education institution for tuition or a medical provider for medical treatments are not included in your $15,000 annual exclusion amount. In addition, if you open and contribute to a 529 savings plan for a child or grandchild, you can gift up to $15,000 (your annual exclusion amount) per year tax-free. Your financial advisor can explain this in more detail.

Choosing the gifting strategy that's right for you

Before you implement any gifting strategy, consult your legal and tax professionals to evaluate how this may affect your estate plan and tax situation. Then your financial advisor can partner with you to implement any changes to your financial strategies and financial goals.

Important Information:

This document is intended for broadly informational purposes only. Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. Please consult your estate-planning attorney or qualified tax advisor regarding your situation.

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