How to Manage Gifts to Meet Your Financial Planning Goals

Nov 21 • Financial Planning • 945 Views • No Comments on How to Manage Gifts to Meet Your Financial Planning Goals

If possible, save your annual gifts and start giving to your kids today.  What are annual gifts?  Gifts are defined as upwards of $14,000 and are free from estate, gift and income taxes.   According to www.irs.gov, other non-taxable gifts include tuition or medical expenses you pay for someone, gifts to your spouse and gifts to political organizations.

Wealthy parents, grandparents or distant uncles and aunts might be financially secure enough to make such gifts.   They are usually made to reduce the size of an estate and shift assets to other family members rather than subject them to taxes once an individual passes away.

Taken over a reasonable period of time, these gifts could add up to substantial wealth if managed well.  Annual gifts can boost your own financial planning goals and help future generations as well.  If you are fortunate to have relatives who make annual gifts to you, consider accumulating instead of spending them to help meet your financial planning needs, especially when you transition to retirement.  The same goes for any inheritance you may receive.  These monies may help close the gap between what you will need and what you have actually saved as you transition into retirement.

In turn, think about making annual gifts to your children if feasible.  Consider this: If a mom were to give her working twenty-five-year-old daughter $5,000 each year to make an IRA investment and continued those gifts for twenty years, the daughter might have $165,000 by age 45 (assuming a reasonable rate of return).  If those assets were to grow for another 25 years, the daughter may have more than $600,000 by age 65 (if the funds were invested to earn more than five percent a year).  Quite an impressive sum!

Gifts are life’s bonuses, so don’t squander them.  Save what you receive and invest in your children and these gifts will keep on giving for generations.

For more information, visit our website at www.makinglifecount.com or contact Stewart Koesten – skoesten@makinglifecount.com, (913) 345-1881.

Photo credit: ejorpin / Foter / CC BY-NC

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