Latest / Money In Motion with Klaas Financial / Gift Giving 2024: Navigating Limits and Generosity

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Gift Giving 2024: Navigating Limits and Generosity · Money In Motion with Klaas Financial

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Speaker 1: We are joined this week by our retirement planning professionals
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Speaker 1: from Class Financial, CJ. Closs and Eric Schwartz. Of course,
0:06
Speaker 1: says I mentioned, they come to us from Class Financial.
0:08
Speaker 1: You can learn more online on their website colossfinancial dot com.
0:12
Speaker 1: That's Class klaas Financial dot com. Fantastic website to learn
0:16
Speaker 1: more about Coss Financial, a little bit about the folks
0:19
Speaker 1: at Class Financial. Also, there's separate divisions there and if
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Speaker 1: you scroll down towards the bottom, you'll see a little
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Speaker 1: envelope and says stay current. From there you can actually
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Speaker 1: sign up for the weekly Market Pulse newsletter. It's a
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Speaker 1: fantastic weekly email that you receive. He's a little update
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Speaker 1: on what's been happening in the markets. Also linked to
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Speaker 1: the most recent podcast that available to you for free
0:37
Speaker 1: at cossfinancial dot com. Again, the website Class financial dot
0:40
Speaker 1: com and the telephone oper for the office right here
0:42
Speaker 1: in Madison six oh eight four four two five, six
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Speaker 1: three seven. Don't forget no charge for that initial gets
0:48
Speaker 1: new the appoyment at Class Financial. It will be complementary
0:51
Speaker 1: to you. As mentioned, joining us this week are CJ
0:53
Speaker 1: and Eric.
0:53
Speaker 2: CJ.
0:54
Speaker 1: How are you doing this morning?
0:55
Speaker 2: I'm doing great. How are you, Sean doing really good?
0:57
Speaker 1: Great to talk with you. Eric, how have you been?
1:00
Speaker 3: I have been great. I'm happy to be here.
1:02
Speaker 1: It's good to talk with both of you. And of
1:05
Speaker 1: course Eric, you've been on a couple uh a few times.
1:08
Speaker 1: It's always great to have you along. And CJ, of
1:10
Speaker 1: course you're just a regular.
1:13
Speaker 2: Thanks Sean, So it's not great to hear from me, you.
1:16
Speaker 1: Know, it's always good to hear. We always have so
1:19
Speaker 1: much fun on the show too. And one of the
1:21
Speaker 1: things we're going to be talking about is gift giving,
1:23
Speaker 1: and I know it's a it's a really really obviously
1:26
Speaker 1: a great thing for everybody if you if you're able
1:29
Speaker 1: to give a gift, and of course those receiving, there
1:31
Speaker 1: are some things you can do to really maximize that.
1:33
Speaker 1: So we're going to talk about some of the things
1:35
Speaker 1: that Coss Financial works with folks on when it comes
1:38
Speaker 1: to that area. We'll do that just a moment. A
1:39
Speaker 1: few things to keep in mind as we talk with
1:41
Speaker 1: CJ and Eric this morning. The phone lines they are
1:44
Speaker 1: open if you've got a question. Six oh eight three
1:46
Speaker 1: two one thirteen ten. That's six oh eight three two
1:49
Speaker 1: one thirteen ten. We'll get you right on the air. Also,
1:51
Speaker 1: of course, you can head on over to the website
1:53
Speaker 1: class Financial dot com learn more about colass Financial and
1:55
Speaker 1: the teph number for the office right here in Madison
1:57
Speaker 1: six oh eight four four two five six seven. Before
2:00
Speaker 1: we get to this week's conversation on gift giving, let's
2:03
Speaker 1: actually take a look back at last week's program. Of course,
2:06
Speaker 1: each and every week we do the Class Quiz question
2:07
Speaker 1: the week, and we'll go back to last week's show
2:09
Speaker 1: and get the question and the answer there as well.
2:13
Speaker 4: Yes, as always, thank you everyone for listening in to
2:16
Speaker 4: all of our followers. Are winning last week for the
2:19
Speaker 4: Money of Madison, the question was true or false? After
2:23
Speaker 4: one hundred days in skilled Mercy Care Facility, Medicare will
2:27
Speaker 4: no longer assist the costs, which meaning just going forward
2:32
Speaker 4: and the answer to that is true.
2:35
Speaker 1: Fantastic, great work by Lonnie. And again we'll do one
2:38
Speaker 1: this week. This week chance to win a twenty five
2:40
Speaker 1: dollars gift card to pet Smart from our friends at
2:43
Speaker 1: Class Financial. Pay Coal's attention. Typically that question and answer,
2:47
Speaker 1: I think pretty much every show we've ever done, question
2:49
Speaker 1: answer come up during the program, so it definitely behooves
2:53
Speaker 1: you to listen closely to the program, and I know,
2:55
Speaker 1: of course we're in that time of year where we're
2:57
Speaker 1: talking about giving gifts to others, and of course we
3:00
Speaker 1: discuss saving savings and other things for our retirement, but
3:04
Speaker 1: also you want to help out adult children. CJ. What
3:08
Speaker 1: do we need to understand about gifting options.
3:11
Speaker 2: Yeah, we've talked about this before on our show, but
3:14
Speaker 2: we're going to discuss it again today because it is
3:16
Speaker 2: a really common area of confusion for clients and consumers.
3:21
Speaker 2: It's this idea around I've heard that if I give
3:25
Speaker 2: money away, it might be taxable, might not be taxable.
3:28
Speaker 2: But then I've heard that I can also give some
3:30
Speaker 2: money away in other circumstances and I get a deduction,
3:33
Speaker 2: and so like, what's going on in the midst of
3:36
Speaker 2: all of this confusion. So we're going to talk about
3:39
Speaker 2: gifting in the form of non charitable gifting and then
3:42
Speaker 2: charible gifting and how those items differ. And unfortunately everybody,
3:47
Speaker 2: it's not that simple, because we all know that the
3:50
Speaker 2: IRS likes to make things confusing. Now, we're going to
3:52
Speaker 2: do our best to make it as simple as we can,
3:55
Speaker 2: but it's just not simple. Now, before we get into
3:58
Speaker 2: this I just want to say, and often you need
4:01
Speaker 2: to check whatever we talk about here with your accountants
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Speaker 2: just to see how it impacts you. We are formally
4:06
Speaker 2: trained in tax but obviously you need to meet with
4:09
Speaker 2: your personal account before you take any action on things
4:11
Speaker 2: we talk about here today. So first of all, let's
4:14
Speaker 2: define what is considered a gift. And again this is
4:18
Speaker 2: different than a charitable contribution. This is a gift. The
4:21
Speaker 2: IRS considers any transfer to an individual, either directly or indirectly,
4:27
Speaker 2: where full consideration measured in money or money's worth is
4:32
Speaker 2: not received in return. The general rule is that any
4:36
Speaker 2: gift is a taxable gift. So wow, right there. First
4:41
Speaker 2: things first, let's pause. I receive a vehicle from mom
4:45
Speaker 2: or Dad. Is that a gift or not? Yes, it
4:48
Speaker 2: is a gift. Right If I did not pay for
4:51
Speaker 2: that vehicle in the full money or money's worth based
4:54
Speaker 2: on the assumed the market value of that vehicle, I
4:57
Speaker 2: received a gift. Oh okay, what if I receive cash
5:01
Speaker 2: same thing I received a gift. I am not a
5:04
Speaker 2: charitable entity. I have received money or an item that
5:07
Speaker 2: is worth dollars. I did not give some exchange back
5:12
Speaker 2: for that gift. Therefore, it is considered a gift. And
5:16
Speaker 2: the second part of that explanation by the IRS is
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Speaker 2: the general rule is that any gift is a taxable gift.
5:23
Speaker 2: Now here's where people's heads fall off because they go, really, so,
5:26
Speaker 2: when I gave that vehicle to my son or daughter
5:30
Speaker 2: after they graduated from college, that was that was a
5:33
Speaker 2: taxable gift. Well, yes, but there's so many exceptions that
5:37
Speaker 2: apply to that that it's really not going to impact
5:41
Speaker 2: you under ninety nine point nine percent of circumstances, which
5:43
Speaker 2: is what we're going to talk about today. So again,
5:46
Speaker 2: while the general rule is that any gift is a
5:48
Speaker 2: taxable gift, there's so many exceptions that apply that. Again,
5:52
Speaker 2: in most of these circumstances, it wouldn't be considered a
5:55
Speaker 2: taxable gift to your child. So so kind of hold
5:57
Speaker 2: on to your hats. That's what we're going to talk
5:58
Speaker 2: about here today. Be So, first things first, there is
6:02
Speaker 2: PA six for federal gift tax purposes that is currently
6:07
Speaker 2: eighteen thousand dollars in twenty twenty four. That means that
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Speaker 2: you can give eighteen thousand dollars per person to as
6:14
Speaker 2: many people as you want, children or no children, with
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Speaker 2: no federal gift tax consequences, and furthermore, if you split
6:22
Speaker 2: that gift with a spouse. So say I want to
6:25
Speaker 2: give money to my daughter, my spouse wants to give
6:27
Speaker 2: money to my daughter. That is eighteen thousand times two
6:29
Speaker 2: or thirty six thousand dollars per recipient that we could
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Speaker 2: give with no here's the key, with no tax from us,
6:38
Speaker 2: no tax to them, and I don't even have to
6:42
Speaker 2: claim it as part of what is called my lifetime
6:45
Speaker 2: exemption amount. Now more to come on that, because some
6:47
Speaker 2: of you are going, what is the lifetime exemption amount?
6:50
Speaker 2: So back to my original example, when you gave that
6:52
Speaker 2: vehicle to your son or daughter under most circumstances, boom
6:57
Speaker 2: right there you can already see by my example. Oh okay, Well,
7:00
Speaker 2: if it was eighteen thousand or thirty six thousand, if
7:03
Speaker 2: I'm married, if it was under that dollar amount, it
7:05
Speaker 2: doesn't even show up anywhere. I don't have to file
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Speaker 2: a gift tax return, nobody has to pay any tax.
7:11
Speaker 2: And so there's kind of exception number one to all
7:14
Speaker 2: gifts being taxable. Exception number two is that in your lifetime.
7:20
Speaker 2: As of twenty twenty four, the max you can give
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Speaker 2: as an individual is thirteen point sixty one million to
7:27
Speaker 2: errors or twenty seven point twenty two million per couple
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Speaker 2: and pay no federal or a state gift tax. So
7:36
Speaker 2: here's the concept. Whether I'm alive or deceased, or any
7:40
Speaker 2: combination thereof, I can give away up to as a couple,
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Speaker 2: because I'm married, up to twenty seven point twenty two
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Speaker 2: million dollars in the year twenty twenty four without it
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Speaker 2: being taxable to me or the recipient. So boom, there's
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Speaker 2: exception number two. CJ. You told me that the general
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Speaker 2: rule is that any gift is taxable, except for if
8:01
Speaker 2: you give only twenty seven point twenty two million dollars,
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Speaker 2: then it's not. Now here's where again it starts getting
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Speaker 2: confused and people go, well, then what does that eighteen
8:11
Speaker 2: thousand dollars number have to do with Well, think of
8:14
Speaker 2: it this way, in your back pocket as an individual
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Speaker 2: as of twenty twenty four, think of it as you like.
8:19
Speaker 2: Have a little certificate that's that at the top of
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Speaker 2: it has thirteen point sixty one million dollars. If you
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Speaker 2: give only eighteen thousand dollars to individuals in a year,
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Speaker 2: you don't even have to write anything on that certificate
8:33
Speaker 2: in your back pocket if you give over eighteen thousand
8:36
Speaker 2: dollars to any individual. So think I gave, you know,
8:40
Speaker 2: let's say thirty six thousand dollars as an individual to
8:42
Speaker 2: a child. Well, now anything over eighteen thousand dollars, I
8:46
Speaker 2: have to take that certificate, pull it out of my
8:48
Speaker 2: hip pocket. This is called Form seven oh nine. By
8:51
Speaker 2: the way, we're going to get into this a little
8:53
Speaker 2: bit later in eric section, and you have to take
8:55
Speaker 2: thirteen point six one million dollars minus the amount over
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Speaker 2: eighteen thousand dollars in that year, and I start subtracting
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Speaker 2: it from thirteen point sixty one million. If during my
9:05
Speaker 2: life or at the end of my life, I give
9:07
Speaker 2: away more than that dollar amount, that's when the taxes
9:11
Speaker 2: start to come into play. So hopefully everybody listening here
9:14
Speaker 2: is getting a little bit of clarity. It's very confusing,
9:17
Speaker 2: but a little bit of clarity that even though the
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Speaker 2: general rule is that any gift is taxable under vast
9:23
Speaker 2: majority of circumstances, you're not going to be paying any
9:25
Speaker 2: tax on that.
9:26
Speaker 1: Not only can tax stuff be confusing, tax stuff I
9:28
Speaker 1: was always changing to make it more confusing. I'm going
9:30
Speaker 1: to ask you about some of the changes and things
9:32
Speaker 1: that people need to be aware of when it comes
9:34
Speaker 1: to the state tax and gift tax. Will do that
9:36
Speaker 1: just a moment as we talk with CJ. Closs and
9:38
Speaker 1: Eric Schwartz, our retirement planning professionals from Class Financial, the
9:40
Speaker 1: website Coss Financial dot com. That's Coss Klaas Financial dot
9:45
Speaker 1: com and they're telephone number six So eight four four
9:47
Speaker 1: two five six three seven. So CJ, let's just say
9:50
Speaker 1: we're all selling to go. Okay, I perfectly. I understand
9:52
Speaker 1: all of this real well, it seems to be every
9:54
Speaker 1: time we start to kind of get comfortable with something,
9:57
Speaker 1: things potentially could be changing, couldn't they.
10:00
Speaker 2: Oh boy, you hit the nail on the Headgean, Yeah,
10:02
Speaker 2: So I noticed I kept emphasizing in twenty twenty four.
10:05
Speaker 2: In twenty twenty four, Well, that's because in twenty seventeen,
10:09
Speaker 2: the Tax Cuts and Jobs Act was passed by Donald
10:12
Speaker 2: Trump into law, which did a number of different things,
10:15
Speaker 2: but a couple of highlights would be that it doubled
10:18
Speaker 2: the standard deduction for a family, and it doubled the
10:22
Speaker 2: federal the lifetime estate tax or gift tax exemption amount.
10:26
Speaker 2: So because of that, you should know that that was
10:30
Speaker 2: a temporary tax Cuts and Jobs Act that actually had
10:33
Speaker 2: a sunset provision on it. That sunset occurs at the
10:36
Speaker 2: end of twenty twenty five going into twenty twenty six.
10:40
Speaker 2: So what you should be aware of is all of
10:42
Speaker 2: what I just told you. While that framework remains true,
10:46
Speaker 2: that thirteen point six to one million dollar exemption that
10:48
Speaker 2: I mentioned earlier, as of twenty twenty four, when we
10:51
Speaker 2: get into twenty twenty six, that scheduled to drop down
10:55
Speaker 2: to about seven million dollars per person, so basically about
10:58
Speaker 2: cut in half, which against seven million per person times
11:03
Speaker 2: two would be fourteen million per couple. That's still a
11:05
Speaker 2: huge amount of money that you can pass during or
11:07
Speaker 2: after life without any gift tax or federal estate tax.
11:11
Speaker 3: Good.
11:12
Speaker 2: But for those of us listening who might have an
11:15
Speaker 2: estate and when I say a state, think your net
11:17
Speaker 2: worth plus life insurance proceeds or the death benefits of
11:20
Speaker 2: life insurance, because that's considered part of your state of death.
11:23
Speaker 2: If you're going to have more than that, to say,
11:24
Speaker 2: fourteen million dollars, you might want to take a hard
11:28
Speaker 2: pause and go talk to your financial advisor or accountant
11:31
Speaker 2: or a state planning attorney, because there's a real world
11:35
Speaker 2: in which you may want to pause and think of
11:37
Speaker 2: doing some gifting before the sunset. Because again, here here's
11:42
Speaker 2: the key, everybody. We're not going to talk a lot
11:45
Speaker 2: about the tax impact because it impacts such a few
11:48
Speaker 2: percentage of Americans. And yet the tax impact is not small.
11:52
Speaker 2: If you go over these amounts during or after life,
11:55
Speaker 2: the tax can be pretty exorbitant, and it's considered. What
11:58
Speaker 2: you'll hear, you know, talk about even during political debates,
12:01
Speaker 2: is the wealth tax, right or the federal estate tax.
12:04
Speaker 2: And in some circumstances, like our neighbors to the south
12:07
Speaker 2: in Illinois. You know what I say, our neighbors to
12:09
Speaker 2: the south. But I think people in Illinois can actually
12:11
Speaker 2: hear this show. So for those of you who are
12:13
Speaker 2: listening to me, in this the lovely state of Illinois,
12:15
Speaker 2: you have a state estate tax that I believe is
12:18
Speaker 2: four million dollars, which is different than the federal estate tax.
12:22
Speaker 2: So welcome to the complexity of having larger dollar amounts.
12:26
Speaker 2: You just need to know how to deal with this.
12:28
Speaker 2: And as you said, Sean, as soon as we get
12:30
Speaker 2: comfortable with something, it changes. I suppose in some ways
12:33
Speaker 2: it gives us job security because things are changing, they
12:36
Speaker 2: need us to keep track of all of it. But
12:37
Speaker 2: it's it's a little bit frustrating to the average consumer
12:40
Speaker 2: for sure.
12:40
Speaker 1: Talking toporn with CJ. Closs and Eric Schwartz, our retirement
12:43
Speaker 1: planning professionals from Class Financial, the website Cossfinancial dot com
12:46
Speaker 1: and the telenphone number six so eight four four two
12:48
Speaker 1: five six three seven. No charge for the initial continuity
12:51
Speaker 1: appointment tech Coss Financial. It will be complementary to you. Again,
12:54
Speaker 1: they're number six oh eight four four two five six
12:57
Speaker 1: three seven. Anything else we need to know here, CJ.
13:00
Speaker 2: Last couple of things in my section here would just
13:02
Speaker 2: be you know, a question that comes up is okay,
13:05
Speaker 2: I kind of get it, so that eighteen thousand, can
13:08
Speaker 2: I deduct that, CJ? When I give that eighteen thousand
13:10
Speaker 2: to my child or when I give that vehicle to
13:12
Speaker 2: my child, because I am I'm giving up something, so
13:15
Speaker 2: can't I deduct that? No, your children are not charities,
13:19
Speaker 2: and nor are any other individuals that you give money to. Now,
13:23
Speaker 2: gifts to charities you can deduct potentially if they're over
13:27
Speaker 2: the standard deduction amount. But we'll talk about that more
13:30
Speaker 2: in a moment. So again generally no. And then another
13:34
Speaker 2: thing people say is, so when I give money away,
13:36
Speaker 2: do I need to file anything on my income taxes?
13:39
Speaker 2: The answer is maybe, if you go over eighteen thousand
13:42
Speaker 2: dollars per person to any one individual, then yes, you
13:45
Speaker 2: need to fill out that form seven oh nine. This
13:48
Speaker 2: is if you're a US citizen, you have to fill
13:50
Speaker 2: out that form seven oh nine, which just basically is
13:53
Speaker 2: my analogy or my imagery there was that certificate in
13:56
Speaker 2: your back pocket. It's basically just tracking the amounts you
14:00
Speaker 2: give over eighteen thousand dollars throughout your life to make
14:02
Speaker 2: sure you don't go over the lifetime exemption amount. Now,
14:05
Speaker 2: one quick caveat here, you can give an unlimited amount
14:09
Speaker 2: of gifts between spouses. Let me repeat that. You can
14:13
Speaker 2: give an unlimited amount of gifts between spouses while they
14:17
Speaker 2: are alive. And actually you can do some even the
14:21
Speaker 2: shifting of assets after death, depending upon the construct of
14:25
Speaker 2: your estate plans. But you get the idea. So this
14:28
Speaker 2: gifting does not mean that, like I write my spouse
14:30
Speaker 2: one hundred thousand dollars check, because it's pretty much unlimited
14:34
Speaker 2: back and forth. But once we both pass away, we've
14:36
Speaker 2: got to kind of check what those those lifetime amounts
14:38
Speaker 2: were to make sure we didn't give away over the limits.
14:41
Speaker 2: And if we did, it's not a bad thing. It
14:43
Speaker 2: just means Uncle Sam's going to start check stepping in
14:46
Speaker 2: and taking a big, big text tax bite out of that.
14:49
Speaker 1: As we talked this morning about you know, about this
14:52
Speaker 1: topic and others, of course, it always reinforces the importance
14:55
Speaker 1: of planning and starting to a conversation. That's one of
14:57
Speaker 1: the great things as we talk with our retirement planning
14:59
Speaker 1: professional from cl Financial, it's a nice reminder to have
15:02
Speaker 1: these discussions and have these conversations. Of course, CJ. Closs
15:05
Speaker 1: and Eric Schwartz join us from Class Financially. We can
15:07
Speaker 1: learn more online the website Coss financial dot com. That's
15:10
Speaker 1: Coss k l a as financial dot com. Their telephone
15:14
Speaker 1: number six o eight four four two five six three seven.
15:17
Speaker 1: That's six oh eight four four two five six three seven.
15:20
Speaker 1: You may be wondering if I give some money, a
15:21
Speaker 1: gift money to someone who have to pay a gift
15:23
Speaker 1: tax on that. We'll with the details on that and
15:25
Speaker 1: so much more next as Money in Motion with Coss
15:28
Speaker 1: Financial continues right here on thirteen ten. WI b A
15:35
Speaker 1: talking with our retirement planning professional CJ. Closs and Eric Schwartz.
15:39
Speaker 1: Of course, they come to us from Class Financial, the
15:41
Speaker 1: website Coss financial dot com that's Coss k l aas
15:45
Speaker 1: Financial dot com and their telephone number six oh eight
15:48
Speaker 1: four four two five six three seven. Do not forget
15:51
Speaker 1: no charge for that initial get to know your appointment
15:52
Speaker 1: at co Loss Financial. It will be complementary to you
15:55
Speaker 1: again their number six oh eight four four two five
15:58
Speaker 1: six three seven. Talking gift tax this week and other
16:01
Speaker 1: things to know when it comes to gifting to others.
16:04
Speaker 1: And just before the break, Eric I had asked about
16:08
Speaker 1: paying a gift tax. What do we need to know there?
16:11
Speaker 1: If you do give money to someone, do you have
16:12
Speaker 1: to pay that gift tax?
16:15
Speaker 2: Yeah?
16:15
Speaker 3: So, as J.
16:16
Speaker 5: Has been underlining for us here, in many, many cases,
16:19
Speaker 5: there is no gift tax that actually needs to be paid.
16:22
Speaker 5: We'll talk in a second here about some of the
16:24
Speaker 5: other exceptions to that, but if there, if you are
16:27
Speaker 5: in a situation where there is a gift tax due,
16:30
Speaker 5: in most cases, the donor is generally going.
16:32
Speaker 3: To be responsible for paying that.
16:34
Speaker 5: There are a few special circumstances where the recipient may
16:38
Speaker 5: pay it, but in most cases it is going to
16:41
Speaker 5: be the donor. Well, let's talk here a little bit more.
16:46
Speaker 5: CJ touched on some of these already, but let's let's
16:48
Speaker 5: talk about some of the exclusions from that that taxable gifting.
16:52
Speaker 5: So the biggest one that we see, and we talked
16:55
Speaker 5: to clients about a lot, is that eighteen thousand.
16:57
Speaker 3: Dollars per year gif TEX exclusion.
16:59
Speaker 5: That that number does change generally annually, but right now
17:04
Speaker 5: it's eighteen thousand dollars per individual.
17:08
Speaker 3: So some people will will give with.
17:11
Speaker 5: Their spouse, giving to your kids, so you each have
17:14
Speaker 5: eighteen thousand dollars that you can give to each child.
17:18
Speaker 5: So this just kind of pushes us further down that
17:20
Speaker 5: path of most often these gifts are not tactical. Another
17:25
Speaker 5: exception is if you are giving money for tuition or
17:29
Speaker 5: for medical expenses, and we'll talk about the rules related
17:32
Speaker 5: to tuition here in a second, but those are also
17:35
Speaker 5: not going to be considered taxicle gifts. CJ just talked
17:39
Speaker 5: about giving to your spouse, so this is another another exception.
17:44
Speaker 5: It is unlimited gifts to your spouse during life and
17:47
Speaker 5: at depth. So that's where we see it often coming
17:50
Speaker 5: in the most is when one spouse passes away all
17:55
Speaker 5: of their assets can then pass give expree to their
18:00
Speaker 5: surviving spouse. Now, if you are married to someone who
18:04
Speaker 5: is not a US citizen, there is a limit. You
18:06
Speaker 5: can gift up to one hundred and eighty five thousand
18:09
Speaker 5: dollars before.
18:09
Speaker 3: It needs to be reported as a gift. That is
18:12
Speaker 3: just one small caveat there.
18:15
Speaker 5: You can also give to any political organization any amount
18:20
Speaker 5: you want without creating a taxable gift.
18:22
Speaker 3: So give to your your heart's desire.
18:24
Speaker 5: There but one other thing I want to highlight here
18:27
Speaker 5: that we've talked a lot about is gifts to your
18:29
Speaker 5: kids are not tax deductible. So I have clients tell
18:32
Speaker 5: me frequently, oh, my kids feel like a charity.
18:36
Speaker 3: Yeah, I know, but they are not.
18:38
Speaker 5: They are not tax deductible when you give them give
18:41
Speaker 5: them money.
18:43
Speaker 1: Take note of that, folks. I'm talking this morning with
18:46
Speaker 1: Eric Schwartz and CJ. Class, our retirement planning professionals from
18:49
Speaker 1: Class Financial. The website Class financial dot com. That's Class
18:52
Speaker 1: k l aas Financial dot com. Great website to learn
18:56
Speaker 1: more about Class Financial or separate divisions. Also sign up
18:58
Speaker 1: to the weekly Market Pall's newsletter and also listen back
19:01
Speaker 1: to this and previous shows. Podcasts all online at Clausfinancial
19:04
Speaker 1: dot com the telephone number six so eight four four
19:06
Speaker 1: two five six three seven. So, Eric, what are some
19:09
Speaker 1: benefits of gifting to family and other folks?
19:14
Speaker 5: Yeah, I think one of the things we talk to
19:16
Speaker 5: clients most about is, yes, it's great to leave assets
19:19
Speaker 5: to to your kids when you're no longer here, but
19:22
Speaker 5: it's also a lot of fun to give while you're
19:24
Speaker 5: here to see them enjoy it.
19:26
Speaker 3: Adult children often appreciate gifts when they're in there.
19:30
Speaker 5: You know, thirties, forties or fifties, and not when when
19:34
Speaker 5: parents are passing away, because honestly, if you're leaving assets
19:38
Speaker 5: at death and you know your kids are in their sixties.
19:41
Speaker 3: At that point, I would hope by that.
19:43
Speaker 5: Point they've they've already done the hard work of saving
19:46
Speaker 5: four retirement.
19:47
Speaker 3: So the gifts are.
19:48
Speaker 5: Really going to be for many people more impactful when
19:51
Speaker 5: they're younger.
19:53
Speaker 3: We really really.
19:54
Speaker 5: Encourage our clients to give, not only because it can
19:56
Speaker 5: help them from from a tax perspective, but it's it's
19:59
Speaker 5: a it's a great feeling and fun to watch people
20:02
Speaker 5: enjoy enjoy those gifts. So one of the things that
20:05
Speaker 5: we really push is kind of coming up with a
20:08
Speaker 5: strategy for forgiving. I think a lot of our clients,
20:12
Speaker 5: especially early in retirement, before they kind of are comfortable with, oh,
20:16
Speaker 5: where's my income coming from? And you know, how am
20:19
Speaker 5: I going to do this, they don't even really think
20:21
Speaker 5: about gifting because it's like, well, I just want to
20:23
Speaker 5: make sure I have enough enough money to live, right.
20:26
Speaker 5: But as people kind of get more comfortable and they
20:29
Speaker 5: move through retirement, they get to a point where they say,
20:32
Speaker 5: you know, I would like to give some of this
20:34
Speaker 5: money away.
20:35
Speaker 3: I'm not going to spend it all, or you know,
20:37
Speaker 3: my kids could really use some help.
20:40
Speaker 5: So that's that's where we actually want to sit down
20:42
Speaker 5: and say, okay, we have this annual gift tax exclusion,
20:46
Speaker 5: what are your goals, what organizations, what people do you
20:49
Speaker 5: want to benefit? And you know, for most people when
20:53
Speaker 5: they're first beginning to gift, we really encourage them maybe
20:57
Speaker 5: starts by giving a small amount, right, See see how
21:00
Speaker 5: that feels for you, See how your kids or the
21:03
Speaker 5: charitable organization utilize the funds, and you can always pick
21:07
Speaker 5: it up later. There's nothing saying that you can't. But
21:10
Speaker 5: it's often really good for people to start slow, we'll say.
21:15
Speaker 5: And I mentioned earlier some of the exceptions to the
21:19
Speaker 5: gifts that we have and one of them was educational expenses.
21:23
Speaker 5: So that was an exception to the eighteen thousand dollars
21:27
Speaker 5: annual gifting limit.
21:28
Speaker 3: You can give an unlimited.
21:30
Speaker 5: Amount, but you need to make sure that the money
21:33
Speaker 5: is paid directly to the educational institution. And another note here,
21:39
Speaker 5: if you are paying helping to pay off student loans,
21:41
Speaker 5: that does not count as the exception unless you were
21:45
Speaker 5: actually a co signer on that student loan for your child.
21:48
Speaker 5: So educational expenses, make sure they're being paid directly to
21:53
Speaker 5: the educational institution. And on the medical side, we talked
21:58
Speaker 5: about that as well. Medical expensive also are also an exception.
22:03
Speaker 5: Those need to be paid directly to the medical institution
22:07
Speaker 5: as well.
22:08
Speaker 1: Always interesting stuff. So we talked this morning with Eric
22:10
Speaker 1: Schwartz and CJ. Closs, our retirement planning professionals from Class
22:14
Speaker 1: Financial Online, Class Financial dot com. That's Class k l
22:17
Speaker 1: a as Financial dot com. That's tell forh number six
22:19
Speaker 1: So eight four four two five six three seven. So Eric,
22:22
Speaker 1: what about adding money to others' retirements accounts?
22:27
Speaker 5: Yes, a great way to use your your annual gift exclusion.
22:31
Speaker 5: So we see people helping their kids or sometimes even
22:35
Speaker 5: grandkids get started saving for retirement, giving them money as
22:39
Speaker 5: they can contribute to their ira at roth IRA or
22:44
Speaker 5: even putting into like a five twenty nine college house
22:48
Speaker 5: savings owned. So the annual limits that somebody could put
22:53
Speaker 5: into a roth IRA this year is seven thousand dollars
22:56
Speaker 5: a year.
22:57
Speaker 3: If you're over fifty, it's eight thousand dollars.
23:00
Speaker 5: But that's an option for people to provide a gift
23:03
Speaker 5: and some support, but also see it put to put
23:06
Speaker 5: to good use.
23:07
Speaker 1: Really great stuff from Eric Schwartz and CJ. Closs, our
23:10
Speaker 1: retirement planning professionals from Class Financial don't forget as always
23:14
Speaker 1: great website. It's there for you Costsfinancial dot com. Check
23:17
Speaker 1: it out COSS financial dot com. That's k l a
23:19
Speaker 1: A S Financial dot Com. Telephone number six O eight
23:22
Speaker 1: four four two five six three seven. No charge for
23:26
Speaker 1: the initial gets to know your appoyment tech Costs Financial.
23:28
Speaker 1: It will be complementary to you again their number six
23:30
Speaker 1: oh eight four four two five six three seven. We'll
23:33
Speaker 1: talk about using trust to make gifts. We'll get the
23:36
Speaker 1: details and of course to the COSS quiz question league.
23:39
Speaker 1: We'll do that next as Money in Motion with COSS
23:41
Speaker 1: Financial continues right here on thirteen ten, wiv A talking
23:49
Speaker 1: with CJ Closs and Eric Schwartz. They are our retirement
23:52
Speaker 1: planning professionals from Class Financial the website coss financial dot com.
23:56
Speaker 1: That's Class K l A A S Financial dot com
23:59
Speaker 1: and they're TWh number six So eight four four two, five,
24:02
Speaker 1: six three seven And I feel like CJ. This next section,
24:05
Speaker 1: we could probably do an entire show or five on
24:08
Speaker 1: this one, which is using trust to make gifts? What
24:11
Speaker 1: do folks need to know their CJ?
24:14
Speaker 2: Yeah, you know, before I get into this, I was
24:16
Speaker 2: I was chuckling as Eric was going through his section
24:18
Speaker 2: because one of the there's a lot of really good
24:20
Speaker 2: and kind of no brainer exceptions to the gifting rules
24:22
Speaker 2: that Eric was just going through, but the one that
24:24
Speaker 2: stuck out to me, and by the way, maybe just
24:26
Speaker 2: call me senecal, that's fine, but it was the gifts
24:30
Speaker 2: to political organizations do not? I thought, how how how
24:35
Speaker 2: convenient for politicians? Uh so they can set rules around
24:39
Speaker 2: us giving money to our own family members, but of
24:42
Speaker 2: course not to them for their causes. So sorry, it's me,
24:45
Speaker 2: call me senecal everybody, But I just thought that was funny, Okay,
24:49
Speaker 2: So yes, uh, looking at making gifts to trust or
24:54
Speaker 2: charitable entities is kind of the next section we're going
24:56
Speaker 2: to go into. And when it comes to making gifts
24:59
Speaker 2: to trust, this is where you can get involved within
25:03
Speaker 2: a state planning attorney. Actually, often when we are giving
25:06
Speaker 2: our clients advice around how to avoid excessive taxation, two
25:10
Speaker 2: things will happen. It'll involve just annual tax management through
25:17
Speaker 2: means of retirement account contributions, WROTH conversions, qualified charitable distributions,
25:22
Speaker 2: all kinds of things like that. It will also include
25:25
Speaker 2: longer term estate planning or tools for tax management through
25:30
Speaker 2: the use of trust with estate planning attorneys. This is
25:34
Speaker 2: why we have something called our COSS Professional Network. For
25:37
Speaker 2: those who are interested, you can go to our website
25:38
Speaker 2: under resources, there's something called the Class Professional Network, which
25:42
Speaker 2: is a network of other professionals, including estate planning attorneys,
25:47
Speaker 2: who we need to work with to carry out a
25:50
Speaker 2: successful financial planment plan. And here would be one of
25:53
Speaker 2: those examples. When you utilize a trust, you can utilize
25:57
Speaker 2: things like an irrevocable trust four purposes of passing on assets.
26:03
Speaker 2: Let's take a simple example, if I have an asset
26:07
Speaker 2: that I believe will grow over time, and in my
26:09
Speaker 2: projection with my financial advisor, it indicates that I may
26:13
Speaker 2: may be one of the few that will be in
26:15
Speaker 2: a position of having over the lifetime exemption amounts. Which again,
26:19
Speaker 2: if these exemption sunset, then in twenty twenty six, that
26:24
Speaker 2: exemption is fourteen million dollars, still a huge amount of
26:26
Speaker 2: money everybody. But if I don't want to just sit
26:29
Speaker 2: exposed to getting whacked by Uncle Sam for every dollar
26:32
Speaker 2: over that, I can give money away to charities. That's
26:35
Speaker 2: a good news. That's a good news, which we'll be
26:36
Speaker 2: talking about in a moment. But I can also put
26:39
Speaker 2: money inside of an irrevocable trust. Now that that money
26:42
Speaker 2: that I put into the irrevocable trust usually is considered
26:45
Speaker 2: a gift right, so I do have to claim a
26:49
Speaker 2: you know, I have to fill it out on Form
26:51
Speaker 2: seven oh nine that amount that I put into that
26:53
Speaker 2: irrevocable trust. But then the growth of those assets over
26:57
Speaker 2: times is no longer in my estate. So if it's
27:00
Speaker 2: projected to be double or triple the value that it
27:03
Speaker 2: is today, I might as well get it out of
27:05
Speaker 2: my estate today and for those people who are wondering,
27:08
Speaker 2: because there might be some of you whose ears are
27:10
Speaker 2: perking up. This is often your shares of your small business.
27:15
Speaker 2: And repeat that, this is often your shares of your
27:17
Speaker 2: small business. Now this gets really complicated. I'm sure a
27:20
Speaker 2: state planning attorneys are listening right now, going, whoa, this
27:23
Speaker 2: is the tip of the iceberg. It's true, it's the
27:26
Speaker 2: tip of the iceberg. You need to understand that your
27:28
Speaker 2: corporate governance needs to allow for it. You know, there's
27:31
Speaker 2: control issues. There's all kinds of stuff here, but an
27:34
Speaker 2: example would be a gift money into an irrevocable trust.
27:37
Speaker 2: It grows, it's outside of my estate, and then upon
27:40
Speaker 2: death it goes to my loved ones or beneficiaries or
27:43
Speaker 2: things like that. There's also things you called grant or
27:47
Speaker 2: retained annuity trusts known as a gratz, where you can
27:50
Speaker 2: get some income off of that, but the gift itself
27:53
Speaker 2: is still given away, although not the full value of
27:57
Speaker 2: the gift is considered a gift, so a lot of
28:00
Speaker 2: interesting I'm sorry, not the full value the amount is
28:02
Speaker 2: considered a charitable gift. So there's some interesting things to
28:05
Speaker 2: look at here. But again, all of these include estate
28:08
Speaker 2: planning attorneys.
28:09
Speaker 1: Talking this morning with CJ. Closs and Eric Schwartzer, retirement
28:12
Speaker 1: planning professials from Class financial website Class financial dot com.
28:15
Speaker 1: That's k L a as Financial dot com hier twelve
28:18
Speaker 1: one number six so eight four four two five six
28:20
Speaker 1: three seven CJ. Are there other solutions here as as
28:24
Speaker 1: far as charitable gift giving?
28:26
Speaker 2: There are and again this is where we along within
28:29
Speaker 2: a state planning attorney would be highly involved. I'll hit
28:32
Speaker 2: just a few at a high level because I know
28:34
Speaker 2: we're running out of time here. But number one would
28:37
Speaker 2: be you can always make outright charitable gifts. There are
28:41
Speaker 2: limitations on how much you can deduct in a year,
28:43
Speaker 2: so it's a if it's a gift of cash. I
28:45
Speaker 2: believe the maximum dollar amount is fifty or sixty percent
28:48
Speaker 2: of your AGI in a year can be deducted, although
28:50
Speaker 2: anything over that just pushes forward to the next year.
28:53
Speaker 2: You can also give to donor advised donor advised funds,
28:57
Speaker 2: which take advantage of something called attax bunching concept. Often
29:02
Speaker 2: you would use a donor advice fund when your income
29:04
Speaker 2: is really high in a year and you want to
29:06
Speaker 2: do multiple year's worth of gifts in one year to
29:09
Speaker 2: try to bring down your taxable income at the high end.
29:12
Speaker 2: By the way, we do a lot, a lot a
29:14
Speaker 2: lot of work with donor advice funds. You can use
29:17
Speaker 2: something called a charitable lead trust, and you can use
29:20
Speaker 2: things called charitable remainder trusts. You can also use like
29:24
Speaker 2: I talked about, grant or retained annuity trusts. There's all
29:26
Speaker 2: kinds of different elements. But charitable remainder unit trusts are
29:30
Speaker 2: interesting because they're considered a split interest trust where you
29:33
Speaker 2: get some deduction today for the money that went into
29:36
Speaker 2: the charitable trust, not the full value of the amount
29:38
Speaker 2: you put in, but a portion. And then often you
29:40
Speaker 2: can get an income stream while you're alive. So it
29:42
Speaker 2: kind of serves two purposes. I get an element of deduction,
29:45
Speaker 2: but I also get some future income and then whatever's
29:48
Speaker 2: leftover goes to my remainder charities. So some really great tools,
29:54
Speaker 2: but often people don't know about these tools and tool
29:57
Speaker 2: until it's too late, because nobody thinks of them sells
30:00
Speaker 2: as wealthy until they actually are. By that time they go, oh,
30:05
Speaker 2: I wish I had done planning fifteen years ago and
30:07
Speaker 2: I wasn't so wealthy. So for everybody just encourage you
30:10
Speaker 2: talk to your advisor, talk to your accountant, and make
30:13
Speaker 2: sure you are pre planning for some of the changes
30:16
Speaker 2: that are coming about. And some of these tools that
30:18
Speaker 2: are available to you.
30:19
Speaker 1: As to go through this stuff some really really good
30:21
Speaker 1: opportunities to really make big differences for a lot of people,
30:24
Speaker 1: but you want to make sure you're executing those plans properly.
30:27
Speaker 1: It's a great time to start that conversation as we
30:29
Speaker 1: talk with CJ. Closs and Eric Schwartz, our retirement planning
30:32
Speaker 1: professionals from Class Financial. The website cossfinancial dot com. That's
30:36
Speaker 1: Coss klaas Financial dot com. And the telephone number for
30:40
Speaker 1: the office right here in Madison sixto oh eight four
30:42
Speaker 1: four two five six three seven. No charge for that
30:45
Speaker 1: initial gets to know your appointment at Coss Financial eight
30:47
Speaker 1: will be complimentary to you again their number six oh
30:50
Speaker 1: eight four four two five six three seven. Well hold
30:53
Speaker 1: on to that telephone number as well, because it's time
30:54
Speaker 1: now for the class quiz question of the week. It
30:56
Speaker 1: works like this and just mod I'll ask you the
30:58
Speaker 1: class quiz question a week. We'll then have thirty minutes
31:00
Speaker 1: from the today's program to call the Cost Financial office
31:02
Speaker 1: right here in Madison at six oh eight four four
31:05
Speaker 1: two five six three seven. If you are the first
31:07
Speaker 1: car correct answer, you win this week's prize, which is
31:09
Speaker 1: a twenty five dollars gift card to pet Smart. This
31:12
Speaker 1: week's COLSS quiz question week is this in twenty twenty four,
31:17
Speaker 1: how much are you able to gift another person with
31:20
Speaker 1: no federal tax consequences? Is it five thousand dollars or
31:24
Speaker 1: eighteen thousand dollars per person? Telephone number six oh eight
31:28
Speaker 1: four four two five six three seven. First call correct
31:31
Speaker 1: answer won the twenty five dollars gift card to pet Smart.
31:33
Speaker 1: And don't forget as well. That's Class Financials office right
31:35
Speaker 1: here in Madison. That number again, six oh eight four
31:38
Speaker 1: four two five six three seven. CJ.
31:40
Speaker 3: Eric.
31:40
Speaker 1: It's always great chatting with both of you guys. Enjoyed
31:42
Speaker 1: this great day.
31:43
Speaker 2: Thanks Sean News coming on.
31:46
Speaker 1: Take Care News comes your way next here on thirteen ten. WIBA,
31:50
Speaker 1: LLC a registered investment advisor registered with the SEC. The
31:54
Speaker 1: contents of this show are for informational purposes only and
31:57
Speaker 1: should not be considered individual investment advice. Class Financial does
32:01
Speaker 1: not offer tax or legal advice. Any opinion offered during
32:05
Speaker 1: the course of this show is the opinion of that
32:07
Speaker 1: particular investment advisor representative, and not necessarily the opinion of
32:12
Speaker 1: class Financial News comes your way next right here on
32:15
Speaker 1: thirteen to ten Wiba