Year-End Is The Perfect Time To Consider Gifting
Oct. 27, 2019 Article

Year-End Is The Perfect Time To Consider Gifting


Q: As we approach year-end, what should I know about gifting to children or grandchildren?

A: For those who have the financial ability and desire to make lifetime gifts to family members, you should consider doing it annually. In 2017, the annual gift tax exclusion allows you to give up to $14,000 ($28,000 for married couples). Next year that amount is being adjusted for inflation and will increase to $15,000 (or $30,000 for a married couple). This is the amount you can gift to an individual without being subject to gift taxes. Keep in mind, gifting decisions should be made in conjunction with additional wealth transfer or estate planning considerations.    

Q: What types of assets are best to gift?

A: Gifting an appreciated stock or mutual fund can be a great way to maximize tax benefits. Many of our clients face combined long-term capital gains tax rates of close to 30 percent (when you include federal, state income taxes, and the health care surtax). At the same time, recent college grads often have a long-term capital gain rate of 0 percent on most investments until they start a job where they earn over $37,950 (increasing to $38,700 for 2018). That represents a great opportunity to maximize a gift.  

Q: Can you give an example of how that would work?

A: Sure, let’s assume a married couple is wanting to provide the maximum annual gift exclusion and make that gift to their daughter who’s a recent college graduate. In order to give cash to her, let’s say they need to liquidate close to $40,000 in very low-basis stock to net a $28,000 gift. Alternatively, consider gifting $28,000 worth of stock ($14,000 from each parent) to the daughter who could turn around and sell it with little or no tax consequences since her income is minimal. Highly appreciated investments with a low original value (cost basis) can be a very effective gifting strategy.

Q: What should I know about charitable giving?

A: If you are going to have an above average tax burden in 2017, and you are charitably inclined, you may want to consider utilizing a donor advised fund (DAF). A donor advised fund will allow you to make a large gift now and take the tax deduction in this calendar year, while deferring the decision on which charity will receive the funds. Because you receive an upfront tax deduction when you make the gift to a donor advised fund, it can be a straightforward, tax-efficient method of charitable planning without forcing you to make the ultimate determination on who will receive the funds at this time.  

The other key thing to know about charitable planning is that it is almost always best to gift appreciated assets rather than cash. Since you are able to avoid paying tax on the unrealized gain of the donated property, this can be a great way to maximize your gifting while minimizing your taxes.


The information contained herein is not intended to be personal legal, investment or tax advice or a solicitation to buy or sell any security or engage in a particular investment strategy. Nothing herein should be relied upon as such. The views expressed are for commentary purposes only and do not take into account any individual personal, financial, or tax considerations. There is no guarantee that any claims made will come to pass.

Mariner Wealth Advisors (“MWA”) is an SEC registered investment adviser with its principal place of business in the State of Kansas. Registration of an investment adviser does not imply a certain level of skill or training. For additional information about MWA, including fees and services, please contact MWA or refer to the Investment Adviser Public Disclosure website. Certain MWA representatives are licensed insurance agents and are compensated for the sale of insurance-related products through an affiliated insurance agency.