FIVE WAYS TO GIFT MONEY WITHOUT PAYING TAXES - 3/11/08

INTRO: It is better to give than to receive.  But when it comes to estate planning, your giving may lead to receiving a hefty tax bill. . . .unless you take our advice. 

1. HOW ARE TAXES TRIGGERED THROUGH GIFTING?

A. The IRS wants you to file a gift tax return and possibly pay a gift tax on any gifts given to an individual over $12,000, whether it is given directly or indirectly.

B. But there are ways to avoid triggering this required filing or being considered a gift.

2. WE HAVE A LIST OF FIVE TOP TAX-SAVING TIPS.  FIRST ON YOUR LIST, IF YOU'RE HELPING A CHILD OR GRANDCHILD WITH EDUCATION, WRITE THE CHECK DIRECTLY TO THE COLLEGE OR UNIVERSITY.

A. Usually indirect gifts for the benefit of another person are considered taxable gifts to that person, but not in the case of higher education.

B. If you want to help out a child or grandchild with their college tuition, don't write the child or parent the check, write it directly to the College or University.

3. Next, WRITE THE CHECK DIRECTLY TO THE MEDICAL INSTITUTION.

A. Again this is another exception to the indirect gifting rule.

B. If you want to help out a family member with their medical expenses, write the check directly to the Medical Institution and not the individual. [Must be certified facility?  Can it be a nursing home?]

4. THIRD, GIVE APPRECIATED STOCK.

A. If you give stock to someone, you still have to stay under the minimum $12,000.  However, when the stock is sold, you won't be paying the taxable gain (the recipient will, but at that tax rate, which for young kids/grandchildren should be quite low).

5. THEN, GIVE YOUR IRA AS A CHARITABLE CONTRIBUTION.

A. When you give your IRA as a Charitable Contribution to a nonprofit 501(c)3, you will not pay the income tax on the distribution.

6. AND FINALLY, MAKE A DEFERRED OR LEVERAGED GIFT.

A. Let's say you plan on giving away the income you have on a CD or on the savings.

B. CAPITAL TRANSFER.  Here we have someone with an account earning 5% on $250,000 and that generates $12,500 per year.  If you reinvest, in ten years you have $407,223 and 20 years $663,325.

C. In this second program the $12,500 is worth $900,000 in 10 years, 20 years and now.  

CLOSE: Smart gifting techniques can help you avoid tax triggers.