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All About Gift-Giving · Money In Motion with Klaas Financial

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  Speaker 1: Joined by a retirement planning professionals CJ. Closs and Eric Schwartz.
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  Speaker 1: Of course they come to us from Class Financial. So
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  Speaker 1: if you've got a retirement related question, love to you,
• 0:08
  Speaker 1: have you join us this morning again. Number to get
• 0:09
  Speaker 1: on the air six oh eight three two one thirteen ten.
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  Speaker 1: That's six oh eight three two one thirteen ten. Telph
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  Speaker 1: number for Colss Financial six oh eight four four two
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  Speaker 1: five six three seven. No charge for that initial get
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  Speaker 1: to know you appointment at COSS Financial. It will be
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  Speaker 1: complimentary to you again. Their number six o eight four
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  Speaker 1: four two five six three seven and their website.
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  Speaker 2: Oh my goodness, head on over to.
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  Speaker 1: The website classfinancial dot com. That's Coss k l aas
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  Speaker 1: Financial dot com newly redesigned and CJ. I'm gonna bring
• 0:38
  Speaker 1: you in on this one real quick, uh updated website.
• 0:42
  Speaker 2: I love it looks really good.
• 0:43
  Speaker 3: How you been Yeah, I've been good, thanks Sean.
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  Speaker 4: Yeah, it's been a long time coming, and our marketing
• 0:48
  Speaker 4: team has put a lot of a lot of effort
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  Speaker 4: into it and hopefully it's a lot more user friendly
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  Speaker 4: and can display our great content.
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  Speaker 1: It reflects the vibrance of COSS Financial and I got
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  Speaker 1: to be honest, it's got a really it's got a
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  Speaker 1: really nice look. So I hope folks get a chance.
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  Speaker 1: Swing by Clossfinancial dot com. That's Coloss Klaas financial dot com.
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  Speaker 1: Speaking of vibrants. Our good friend Eric Schwartz from Class
• 1:10
  Speaker 1: Financial joins us this morning as well. Eric, how you
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  Speaker 1: doing this morning?
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  Speaker 5: I am doing great, Sean, what a compliment this morning.
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  Speaker 5: I want to start every day like.
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  Speaker 2: Well, that's it's great to hear from you.
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  Speaker 1: And I love chatting with both of you guys each
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  Speaker 1: and every week, and this week speaking of things that
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  Speaker 1: we love, gift giving is a great is a great
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  Speaker 1: thing to talk about and learn about. And there are
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  Speaker 1: some there are some things you can do when it
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  Speaker 1: comes to helping out you know, your adult children financially
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  Speaker 1: and others. And we'll talk with Eric and CJ all
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  Speaker 1: about that this morning on the program. Again, guys, love
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  Speaker 1: getting questions, Love getting those calls at six oh eight
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  Speaker 1: three two one thirteen ten. That's six oh eight three
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  Speaker 1: two one thirteen ten. Another really cool feature of the
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  Speaker 1: show is the Class Quiz Question the week a chance
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  Speaker 1: for you to win a fantastic prize this week no exception,
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  Speaker 1: our friends from Class Financial have provided a twenty five
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  Speaker 1: dollars gift card too. Sephora, we'll tell you a little
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  Speaker 1: bit late on the program how you can win that
• 2:02
  Speaker 1: little tip. Listen close to the program because just about
• 2:04
  Speaker 1: every show, the question and answer come up during that program.
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  Speaker 2: Before we start.
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  Speaker 1: Talking about gift giving, let's actually roll back to last
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  Speaker 1: week's program and do the class quiz question week and
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  Speaker 1: answer from that show as well, CJ or excuse me, Eric.
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  Speaker 5: Yeah, I think I think I'll do this part. The
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  Speaker 5: question from last week was true or false. Long term
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  Speaker 5: capital gains are gains from selling assets you've held for
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  Speaker 5: more than one year. The answer to that was true,
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  Speaker 5: and Carol from Madison was our winner from last week.
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  Speaker 1: Nice work, Carol, and you two can be like Carrol.
• 2:36
  Speaker 1: Just listen closer to the program. You get all the
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  Speaker 1: details on winning the clas quiz question a week a
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  Speaker 1: little bit later on the show.
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  Speaker 2: The website classfinancial dot com.
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  Speaker 1: That's closs klaa Ask Financial dot com and they're telephone
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  Speaker 1: number six so eight four four two five six three seven.
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  Speaker 1: So a lot of folks, of course were focused on
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  Speaker 1: saving and of course for retirement, but there's also that
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  Speaker 1: you know you want to help your adult children financially,
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  Speaker 1: whether it's the other things like a down pain or
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  Speaker 1: maybe education, school, those type of things, or just general support.
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  Speaker 1: We'll bring you in CJ on this one. What should
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  Speaker 1: we know when it comes to strategies for gift giving?
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  Speaker 3: Yeah, this is an important topic. Eric can a test.
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  Speaker 3: We have a lot of clients asking about this, both
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  Speaker 3: in terms of kind of the tax consequences if you
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  Speaker 3: give money to your children or a loved one, and
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  Speaker 3: then also limitations because they've heard that you have to
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  Speaker 3: be careful how much you give. So that's kind of
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  Speaker 3: the broad topic that we're going to discuss today. So
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  Speaker 3: parents are often eager to support their children, and we
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  Speaker 3: encourage that. Even there's times when Eric and I will
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  Speaker 3: bring up to our clients, Hey, we think you should
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  Speaker 3: start considering gifting assets because of the size of their estate.
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  Speaker 3: But doing it wisely is pretty critical. So let's begin
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  Speaker 3: with the kind of table stakes here. What is a
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  Speaker 3: gift in the eyes of the IRS? So, a gift
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  Speaker 3: is any transfer of money or property where full value
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  Speaker 3: isn't received in return. The IRS generally considers this a
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  Speaker 3: taxable gift unless it qualifies for an exclusion. Now, I
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  Speaker 3: just want to pause. Everybody, don't panic because you heard
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  Speaker 3: me say IRS generally considers this a taxable gift. But
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  Speaker 3: I want you to pay attention to that last section,
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  Speaker 3: which has unless it qualifies for an exclusion or actually
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  Speaker 3: an exemption. And so just know there are so many
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  Speaker 3: exclusions and exemptions that most gifts don't end up being taxable.
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  Speaker 3: But more on that as we move through the show. So,
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  Speaker 3: an important concept for everybody to understand is the annual
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  Speaker 3: gift tax exclusion. In twenty twenty five, you can gift
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  Speaker 3: up to nineteen thousand dollars per recipient without triggering federal
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  Speaker 3: gift tax reporting. Married couples can combine that to give
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  Speaker 3: thirty eight thousand dollars to one person. So let's just
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  Speaker 3: take the most simple, obvious example of this. So, CJ,
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  Speaker 3: what I hear you saying is if I want to
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  Speaker 3: give my child a gift and not have to report it,
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  Speaker 3: I can give nineteen thousand dollars to my child, and
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  Speaker 3: my spouse can give nineteen thousand dollars to that child
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  Speaker 3: for thirty eight thousand dollars total in the year twenty
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  Speaker 3: twenty five. In the answer to be yes, there's not
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  Speaker 3: even a gift tax return return known as Form seven
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  Speaker 3: oh nine. You don't have to even worry about that.
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  Speaker 3: So again, if you have multiple children or multiple loved ones,
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  Speaker 3: you realize you can give away a lot of money
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  Speaker 3: in a year, you know, thirty eight thousand to one child,
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  Speaker 3: do another child, do another child, to another family member.
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  Speaker 3: You can do that without even having to file a
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  Speaker 3: gift tax return. Now that moves to the next part
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  Speaker 3: of this What do you mean a gift tax return. Well,
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  Speaker 3: there's something known as a lifetime gift or estate tax
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  Speaker 3: exemption amount. So the lifetime federal estate and gift tax
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  Speaker 3: exemption amount in twenty twenty five is thirteen point ninety
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  Speaker 3: nine million dollars per person or twenty seven point nine
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  Speaker 3: eight million dollars per couple. This had been set to
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  Speaker 3: expire at the end of this year, but through the
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  Speaker 3: OBBBA that was actually now permanently extended. But here's the key.
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  Speaker 3: So if I give over that nineteen thousand dollars per
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  Speaker 3: year per person or thirty eight thousand dollars per person
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  Speaker 3: for a couple, what do I do?
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  Speaker 5: Then?
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  Speaker 3: What if I want to give one hundred thousand dollars
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  Speaker 3: to my child for a downpayment on a home Number one,
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  Speaker 3: we might want to talk to you about that. I
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  Speaker 3: don't know that that's the right thing to do, but
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  Speaker 3: if you want to do that, all you have to
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  Speaker 3: do then is file that Form seven h nine and
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  Speaker 3: the amount over the nineteen thousand or the thirty eight
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  Speaker 3: thousand for the couple, the difference between the one hundred
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  Speaker 3: thousand and we'll call it the thirty eight thousand, that
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  Speaker 3: is what reduces your lifetime federal estate and gift tax exemption.
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  Speaker 3: So think of it as you have like a certificate
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  Speaker 3: in your back pocket that says I can give away
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  Speaker 3: during or after life fourteen million dollars. And if I
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  Speaker 3: give over the annual exclusion amount in any given calendar year,
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  Speaker 3: I just have to start subtracting from that lifetime amount.
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  Speaker 3: Hopefully that may sense. Probably would be easier to tell
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  Speaker 3: you all of this like in a whiteboard context, but
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  Speaker 3: this is radio. This is our best effort, so by
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  Speaker 3: all means, if you have any questions about this, call
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  Speaker 3: our office because this is a big one. But just
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  Speaker 3: remember you know this, this whole kind of larger exemption
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  Speaker 3: amount was passed as part of the twenty seventeen tax
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  Speaker 3: cuts and Jobs Act, and then the OBBBA made this
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  Speaker 3: more permanent, so this higher gift and a state tax
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  Speaker 3: exemption amount was made permanent. Now one quick warning, because
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  Speaker 3: I know the airwaves can travel down to our Illinois friends. Yes,
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  Speaker 3: and you in the state of Illinois have a state
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  Speaker 3: a state tax exemption amount which is separate from the
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  Speaker 3: federal estate tax exemption amount. And that amount is four
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  Speaker 3: million dollars per person.
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  Speaker 1: So just something to be mindful those of you listening
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  Speaker 1: on the state line, definitely be mindful of that. A
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  Speaker 1: lot of great information as well as we talked this
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  Speaker 1: morning with our retirement planning professional CJ. Claws and Eric Schwartz.
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  Speaker 1: Of course they come to us from Klaus Financial. There
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  Speaker 1: website class financial dot com. That's Class k l AA
• 8:03
  Speaker 1: s Financial dot com. Telph number six oh eight four
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  Speaker 1: four two five six three seven. No charge for that
• 8:09
  Speaker 1: initial gets no you appointment tech Loss Financial. It will
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  Speaker 1: be complementary to you again their number six O eight
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  Speaker 1: four four two five six three seven will continue our
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  Speaker 1: conversation about gift giving. We will do that next as
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  Speaker 1: Money in Motion with Coss Financial continues here on thirteen ten,
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  Speaker 1: wib A talking with our retirement planning professionals CJ.
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  Speaker 2: Class and Eric Schwartz.
• 8:27
  Speaker 1: Of course, they come to us from Class Financial the
• 8:28
  Speaker 1: website class financial dot com. That's Class k l aa
• 8:32
  Speaker 1: S financial dot com. They're teleph number six O eight
• 8:35
  Speaker 1: four four two five six three seven. No charge for
• 8:37
  Speaker 1: that initial gets no appointment at Colss Financial. It will
• 8:40
  Speaker 1: be complementary to you again their number six O eight
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  Speaker 1: four four two five six three seven. So talking gift
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  Speaker 1: giving this week, a really important conversation, a great opportunity
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  Speaker 1: as well if you are in that type of position
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  Speaker 1: to be helping family, friends, and other organizations out.
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  Speaker 2: And we'll get into all of that.
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  Speaker 1: Stuff as the program continues this morning. And Eric is
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  Speaker 1: as we talk talk about this stuff, So if I
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  Speaker 1: givet somebody some money, will I have to pay taxes
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  Speaker 1: as the giver on that?
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  Speaker 5: Yeah, that's a good question, Sean. And the short answer is,
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  Speaker 5: in most cases, no, there's no immediate tax to pay.
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  Speaker 5: But let's get a little bit more into why that is.
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  Speaker 5: That's sort of the short answer, but it's it's important
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  Speaker 5: to understand what's behind it. And before we jump into this,
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  Speaker 5: just a quick reminder. We tell people this all the time.
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  Speaker 5: Personal gifts are not deductible on your income tax return.
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  Speaker 5: No matter how much your children or other family members
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  Speaker 5: may feel like charities, they do not qualify in the
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  Speaker 5: eyes of the IRS. So no tax to be paid
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  Speaker 5: on the gift, but also also no deduction. So CJ
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  Speaker 5: was talking a little bit earlier about Form seven oh nine.
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  Speaker 5: So this is the form that you file with your
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  Speaker 5: income tax return if you have a gift that falls
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  Speaker 5: outside of the exceptions, right, so ZJ was just talking
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  Speaker 5: about the the annual exclusion, the lifetime, the lifetime exemption.
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  Speaker 5: Will We'll get a little bit more into that here
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  Speaker 5: in a moment, But if you actually give a gift
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  Speaker 5: that qualifies as a gift in the eyes of the IRS,
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  Speaker 5: you would actually need to fill out that Form seven
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  Speaker 5: to nine. Now, the tax liability, if there is any,
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  Speaker 5: is typically that of the giver or the donor. They're
• 10:25
  Speaker 5: responsible for any tax, do not the person receiving the gift. Now,
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  Speaker 5: there are a few exceptions to that, but this is
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  Speaker 5: the general rule. But we were talking a little bit earlier.
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  Speaker 5: CJ was covering some of the exclusions and why we
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  Speaker 5: say generally if people are giving what we would call,
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  Speaker 5: you know, normal gifts, they're probably not they're probably not
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  Speaker 5: having to pay tax is because the exceptions, well there's
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  Speaker 5: a few of them here. The first one would be
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  Speaker 5: anything inside of that nineteen thousand dollars annual exclusion. Remember
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  Speaker 5: that as perpose person. So a married couple could give
• 11:02
  Speaker 5: thirty eight thousand dollars in twenty twenty five to any
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  Speaker 5: individual and not have to report it, not have to
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  Speaker 5: pay any gift tax on it. If you make a
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  Speaker 5: tuition payment or a medical payment directly to a university
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  Speaker 5: or a hospital, that is not considered a gift in
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  Speaker 5: the eyes of the irs that needs to be reported.
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  Speaker 5: You have an unlimited exclusion to give gifts to your
• 11:30
  Speaker 5: US citizen spouse, So there's an unlimited gift between spouses.
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  Speaker 5: If you have a non citizen you or if you
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  Speaker 5: have a non citizen spouse, you are excluded to one
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  Speaker 5: hundred and ninety thousand dollars that you can actually give
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  Speaker 5: without having to report it. And finally, if you are
• 11:49
  Speaker 5: giving to a political organization, there are no limits on that,
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  Speaker 5: which is interesting, say the Lee.
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  Speaker 2: Wait, the people that write these laws, are you got it, Sean?
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  Speaker 5: You got it?
• 12:04
  Speaker 2: Well, that isn't that interesting and curious?
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  Speaker 1: As as we talk with our retirement athletic professionals, Eric
• 12:10
  Speaker 1: Schwartz and CJ.
• 12:11
  Speaker 2: Closs.
• 12:11
  Speaker 1: Of course, the website class financial dot com. That's Claus
• 12:14
  Speaker 1: k l aas Financial dot com. They're telephone number six
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  Speaker 1: eight four four two five six three seven. So what
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  Speaker 1: are the benefits of giving money while you're still alive?
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  Speaker 2: CJ?
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  Speaker 3: Yeah, it's a great question, Sean, and and there's significant benefits.
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  Speaker 3: So obviously it's an emotional and financial benefit to those
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  Speaker 3: that you're giving the funds to. You get to see
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  Speaker 3: your impact now, get to see the experience and the
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  Speaker 3: joy of your children or grandchildren getting to benefit from
• 12:45
  Speaker 3: those dollars, often in their thirties, forties or fifties when
• 12:48
  Speaker 3: they're raising children, buying homes, or changing careers. And just
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  Speaker 3: for those of you out there, I want you to know,
• 12:53
  Speaker 3: we actually don't care whether or not people gift their dollars.
• 12:57
  Speaker 3: We will often say whether we think they can afford to,
• 13:00
  Speaker 3: and then we'll talk about the pros and concept doing that,
• 13:02
  Speaker 3: but we're not antied up on one side or the other.
• 13:05
  Speaker 3: This is the beauty for us of being a fee
• 13:06
  Speaker 3: based retirement planning firm is we really don't have any
• 13:10
  Speaker 3: agenda here we just want to help you accomplish your goals,
• 13:13
  Speaker 3: but we are going to give authoritative advice when we
• 13:17
  Speaker 3: think it's worthwhile. So an example of this would be
• 13:20
  Speaker 3: if somebody says, I don't want to give anything to
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  Speaker 3: my kids along the way, We'll just leave them millions
• 13:25
  Speaker 3: and millions and millions of dollars when we die. Eric
• 13:28
  Speaker 3: and I will pause and just say, let me just
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  Speaker 3: challenge you on that. Thinking a little bit, if you
• 13:33
  Speaker 3: got millions of dollars right now in your seventies, how
• 13:36
  Speaker 3: would that benefit you? And often people go, it wouldn't
• 13:38
  Speaker 3: change my life at all. I go, okay, what if
• 13:41
  Speaker 3: you got, you know, thirty eight thousand dollars when you
• 13:45
  Speaker 3: were thirty five years old raising children, would that have
• 13:47
  Speaker 3: impacted you? And they go, oh my gosh, it would
• 13:49
  Speaker 3: have been life changing. I go, bingo, You see the point, right,
• 13:53
  Speaker 3: it's when your children, When you die and leave that
• 13:56
  Speaker 3: hundreds of thousands or millions of dollars to your children,
• 13:59
  Speaker 3: and they are now seventy years old themselves, it's not
• 14:03
  Speaker 3: it's not going to do that much for them. They'll
• 14:05
  Speaker 3: probably just pass it on to the next generation. But
• 14:08
  Speaker 3: if you can give little amounts you can kind of
• 14:10
  Speaker 3: see what they do with it, make sure that they're responsible,
• 14:12
  Speaker 3: even give them feedback around saying, hey, that might have
• 14:15
  Speaker 3: not been the most wise thing. You might want to
• 14:17
  Speaker 3: consider investing a portion or putting it into you know,
• 14:20
  Speaker 3: you get the idea, you get to see an experience
• 14:23
  Speaker 3: and give them guidance on that. So we just cannot
• 14:25
  Speaker 3: suggest enough if you're going to be leaving money to children,
• 14:29
  Speaker 3: and that's a big butt you know, that's a big
• 14:31
  Speaker 3: question mark. If you know that you're going to be
• 14:34
  Speaker 3: leaving money to children, you may want to consider moving
• 14:37
  Speaker 3: up that timetable. Obviously it can help, you know, with
• 14:40
  Speaker 3: with education and medical expenses, which Eric just mentioned, if
• 14:44
  Speaker 3: you paid directly on some of those education and medical expenses,
• 14:47
  Speaker 3: it doesn't even hit any of these limitations that we're
• 14:50
  Speaker 3: talking about. So really significant benefits of helping children, grandchildren
• 14:56
  Speaker 3: or loved ones. And now I will say, if you're
• 15:00
  Speaker 3: going to take advantage of this like no limitation on
• 15:03
  Speaker 3: medical expenses, you do have to pay those dollars traditionally
• 15:07
  Speaker 3: directly to the doctor or the hospital or the insurance company.
• 15:12
  Speaker 3: And similarly, with like education expenses, you do have to
• 15:15
  Speaker 3: pay again go directly to the institution. You can't say,
• 15:19
  Speaker 3: here's sun or daughter, here's one hundred thousand dollars. Because
• 15:23
  Speaker 3: CJ on the radio said, there's no limitation on student
• 15:26
  Speaker 3: loan payoff. Here's one hundred thousand. You pay off your loans.
• 15:29
  Speaker 3: You see the problem with that, don't you. You gave
• 15:32
  Speaker 3: it to son or daughter. Son or daughter then paid
• 15:34
  Speaker 3: it off. Well, that the gift limitation is to the
• 15:37
  Speaker 3: sun or daughter. If you want to have that more
• 15:40
  Speaker 3: unlimited exemption, then you have to pay it directly to
• 15:42
  Speaker 3: the institution. And then obviously, when you give money to
• 15:46
  Speaker 3: your children, you can also encourage them to set up
• 15:49
  Speaker 3: things like wroth I raise or brokerage accounts or five
• 15:54
  Speaker 3: twenty nine's for your grandchildren. So again, giving some of
• 15:57
  Speaker 3: those dollars earlier can have large benefits. Now I will
• 16:00
  Speaker 3: say it can also create some issues. So one thing
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  Speaker 3: we would encourage you is don't give and then have
• 16:07
  Speaker 3: massive opinions about that gift, because if you do, it
• 16:10
  Speaker 3: feels like what well strengths attached? Right here, here's some money,
• 16:14
  Speaker 3: but I hope you behave appropriately. It would be more. No,
• 16:17
  Speaker 3: here's some money, give some guidance like here, you might
• 16:20
  Speaker 3: want to consider some of these things. This is what
• 16:22
  Speaker 3: we've learned over time, but be ever so cautious of
• 16:25
  Speaker 3: viewing that gift as kind of like a pseudo winkwink loan.
• 16:29
  Speaker 3: Don't do that. We're not big fans of giving loans
• 16:31
  Speaker 3: to children, but we are bigger fans of outright gifts.
• 16:35
  Speaker 2: Great perspective from CJ. Class and Eric Schwartz.
• 16:37
  Speaker 1: They are our retirement planning professionals from Class Financial.
• 16:40
  Speaker 2: I've been thinking about these types of things.
• 16:42
  Speaker 1: You've been thinking about making contact with the folks Class Financial.
• 16:45
  Speaker 1: Today is a great day to start that conversation. All
• 16:48
  Speaker 1: you got to do is pick up phone, gave a
• 16:49
  Speaker 1: call six so eight four four two five six three seven.
• 16:52
  Speaker 1: No charge for that initial get to know your appoyment
• 16:54
  Speaker 1: tech Class Financial. It will be complimentary to you. Their
• 16:56
  Speaker 1: website cossfinancial dot com. That's Coss k l a a
• 16:59
  Speaker 1: s finance dot com. As a matter of fact, you
• 17:01
  Speaker 1: can schedule a complementary conversation right online at cossfinancial dot
• 17:06
  Speaker 1: com as well. We're gonna sear our conversation with Eric
• 17:08
  Speaker 1: and CJ. We're going to talk about incorporating trusts as
• 17:12
  Speaker 1: a as a gift gifting strategy. With the details next
• 17:16
  Speaker 1: as Money in Motion with Coss Financial continues here, I'm
• 17:19
  Speaker 1: thirteen ten wib A talking with our retirement planning professionals CJ.
• 17:23
  Speaker 2: Closs and Eric Schwartz.
• 17:24
  Speaker 1: Of course they come to us from Coss Financial the
• 17:26
  Speaker 1: website cossfinancial dot com.
• 17:28
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• 17:29
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• 17:30
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• 17:32
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• 17:35
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• 17:38
  Speaker 1: to the podcast, listening lot, listening live as well. Again
• 17:41
  Speaker 1: that all available to you at colassfinancial dot com are
• 17:43
  Speaker 1: top number six o eight four four two five six
• 17:46
  Speaker 1: three seven. No charge for the initial gets to know
• 17:48
  Speaker 1: you appointment at Coss Financial. It will be complimentary to
• 17:50
  Speaker 1: you again their number six oh eight four four two
• 17:53
  Speaker 1: five six three seven. Talking gift giving this week in
• 17:56
  Speaker 1: Eric when it comes to trusts, can those be part
• 17:58
  Speaker 1: of a gifting strategy?
• 18:02
  Speaker 5: Absolutely, I mean this is an area you definitely won't
• 18:04
  Speaker 5: definitely want to discuss with your state planning attorney because
• 18:07
  Speaker 5: it's generally part of a much more advanced estate plan.
• 18:11
  Speaker 5: But we'll do a quick overview here just to give
• 18:14
  Speaker 5: you a few topics that you may want to discuss
• 18:16
  Speaker 5: with your attorney. So the first one that we probably
• 18:20
  Speaker 5: see use the most for gifting is an irrevocable trust.
• 18:25
  Speaker 5: So think about the name there, irrevocable. This is where
• 18:30
  Speaker 5: this is a setup where you transfer assets into it
• 18:33
  Speaker 5: to move them out of your taxable estate. Okay, so
• 18:37
  Speaker 5: we were talking earlier about the really highest state tax exemption,
• 18:41
  Speaker 5: so this doesn't apply to a lot of folks, but
• 18:44
  Speaker 5: for some people, if your state is going to exceed
• 18:47
  Speaker 5: that exemption, you may actually want to move dollars out
• 18:50
  Speaker 5: of your estate before you die. And an irrevocable trust
• 18:54
  Speaker 5: is a way of getting assets out of your estate
• 18:58
  Speaker 5: and maintaining some level of control over them. But keep
• 19:03
  Speaker 5: in mind you're transferring those assets to something else, you
• 19:06
  Speaker 5: are no longer the owner of them. So that would
• 19:09
  Speaker 5: be one strategy that people use for gifting before they die.
• 19:14
  Speaker 5: A variation of that is an irrevocable life insurance trust
• 19:18
  Speaker 5: or an islet. And basically what this does is it's
• 19:22
  Speaker 5: a legal entity that owns your or that is the
• 19:25
  Speaker 5: beneficiary and I'm sorry, not the beneficiary owns your life
• 19:29
  Speaker 5: insurance policy. And that makes the death benefit not part
• 19:34
  Speaker 5: of your estate when you pass away. So that would
• 19:36
  Speaker 5: be another way that people will We'll use a trust
• 19:39
  Speaker 5: in this way, and finally a grant or retained annuity
• 19:42
  Speaker 5: trust or a grat. You know, we love our we
• 19:45
  Speaker 5: love to shorten anything we can in this industry. This
• 19:49
  Speaker 5: transfers appreciation to your airs with minimized gift tax exposure.
• 19:54
  Speaker 5: These work well with stocks or private equity or closely
• 19:58
  Speaker 5: held businesses that are expected to be growing a lot
• 20:01
  Speaker 5: and then eventually sold. So that would be another more
• 20:03
  Speaker 5: advanced strategy.
• 20:05
  Speaker 2: That's grat information. Oh that's a dad joke right there, man. Oh,
• 20:13
  Speaker 2: fun stuff.
• 20:14
  Speaker 1: As always, we do always like to have fun on
• 20:16
  Speaker 1: the progress. We talk with Eric Schwartz and CJ Closs
• 20:18
  Speaker 1: or retirement planning professionals from Class Financial and CJ.
• 20:21
  Speaker 2: What if I want my gifts to go to a
• 20:24
  Speaker 2: charity instead?
• 20:26
  Speaker 3: Yeah, good question. So just touching quickly on what Eric
• 20:30
  Speaker 3: was referencing there. You know, this is for those of
• 20:32
  Speaker 3: you who are worried about those federal estate tax exemption amounts.
• 20:36
  Speaker 3: That's kind of fourteen to fifteen million dollars we were
• 20:38
  Speaker 3: talking about before, and some of you are going. You know,
• 20:41
  Speaker 3: it's not going to impact me. But remember often where
• 20:45
  Speaker 3: we see this impacting people are farmers who own a
• 20:47
  Speaker 3: lot of land. I know you farmers don't think that
• 20:50
  Speaker 3: you're wealthy, but the value of your land may have
• 20:54
  Speaker 3: something else to say about that. Or small business owners
• 20:57
  Speaker 3: who just happen to run a great business. The business
• 21:00
  Speaker 3: grows and then you get towards the end and have
• 21:02
  Speaker 3: what we call a liquidity event or sell your shares
• 21:05
  Speaker 3: and suddenly you go, WHOA, that's a lot of stink
• 21:07
  Speaker 3: and money. If those are things that could impact you,
• 21:11
  Speaker 3: what you might want to think about, if you call
• 21:13
  Speaker 3: it before those liquidity events orus maybe sub eighty or
• 21:17
  Speaker 3: sub seventy, is to think about getting some of those
• 21:20
  Speaker 3: shares or dollars or land into a irrevocable trust, as
• 21:25
  Speaker 3: Eric was just talking about now, because then all of
• 21:28
  Speaker 3: the future growth before you die is outside of your state.
• 21:32
  Speaker 3: So we'll see this with small business owners. They'll take
• 21:35
  Speaker 3: thirty percent of their equity value inside of their business
• 21:40
  Speaker 3: and actually have it owned by an irrevocable trust, so
• 21:43
  Speaker 3: that if that thirty percent quadruples in value by the
• 21:46
  Speaker 3: time they have that liquidity event, it's all outside of
• 21:49
  Speaker 3: the estate. Now, as Eric just said, these are advanced
• 21:52
  Speaker 3: estate planning techniques. You need to talk to your lawyer
• 21:54
  Speaker 3: and financial advisor for sure. But yes, this next category
• 21:58
  Speaker 3: that you're asking about, Sean, is charitable gifting. Up until now,
• 22:01
  Speaker 3: most of what we've been discussing has been limited by
• 22:05
  Speaker 3: two primary factors. One, if you don't want to have
• 22:07
  Speaker 3: to reduce that fourteen million dollar certificate I talked about before,
• 22:11
  Speaker 3: then you just stay under the annual exclusion amount of
• 22:14
  Speaker 3: nineteen thousand dollars per person per year. If you go
• 22:18
  Speaker 3: over that amount, then typically you have to start taking
• 22:21
  Speaker 3: out that certificate and taking fourteen million minus something. So
• 22:24
  Speaker 3: start reducing your during or after life exemption amount. But
• 22:29
  Speaker 3: what and then Eric mentioned some things where it's like,
• 22:31
  Speaker 3: but there's some you know what about paying medical expenses
• 22:35
  Speaker 3: and paying off student loans. There's some rules where you
• 22:38
  Speaker 3: can give even more than that without having to reduce
• 22:42
  Speaker 3: that lifetime exemption amount. But what about these charitable gifts.
• 22:45
  Speaker 3: This is a big one. So outright gifts to qualified
• 22:50
  Speaker 3: charities think public nonprofits, there's no gift tax, and you
• 22:54
  Speaker 3: may even get an income tax deduction in the year
• 22:57
  Speaker 3: of that gift. This is key so everything we else
• 23:00
  Speaker 3: we talked about was like it may or may not
• 23:03
  Speaker 3: reduce your lifetime exemption, but there's limitations and kind of
• 23:06
  Speaker 3: things you got to be careful of. And by the way,
• 23:08
  Speaker 3: you get no deduction. In the world of the public
• 23:12
  Speaker 3: charities totally different ballo acts. Not only no tax, not
• 23:16
  Speaker 3: only no limitation in terms of how much you give. Well,
• 23:19
  Speaker 3: there can be some annual limitations, but generally speaking you
• 23:23
  Speaker 3: might even get a deduction. So this is gets a
• 23:27
  Speaker 3: little bit tricky. We have a future show coming up
• 23:29
  Speaker 3: or we're going to dig into this topic even in
• 23:31
  Speaker 3: greater detail. But where often people are not getting deductions
• 23:36
  Speaker 3: on their gifts to qualify charities is because it's not
• 23:40
  Speaker 3: exceeding their annual exclude or there, I'm sorry, there their
• 23:45
  Speaker 3: annual standard deduction lost the term their standard deduction amount
• 23:50
  Speaker 3: because that number has gotten pretty large for most Americans
• 23:53
  Speaker 3: think you know, on average around twenty five to thirty
• 23:55
  Speaker 3: thousand dollars. So if you're itemized deductions don't exceed your
• 24:00
  Speaker 3: standard deduction amount, then even though you're giving money to
• 24:04
  Speaker 3: charities that quote unquote qualify for an itemization of deduction,
• 24:09
  Speaker 3: it just doesn't matter because you're not giving enough. So
• 24:13
  Speaker 3: this is where donor advice funds will come in. Donor
• 24:15
  Speaker 3: advice funds are a public nonprofit charity, but they're an
• 24:19
  Speaker 3: intermediary meaning it's not going to its final resting place.
• 24:23
  Speaker 3: So you may do five years worth of annual charitable
• 24:27
  Speaker 3: deductions in one year into a donor advised fund. Why
• 24:31
  Speaker 3: because you're going to dramatically exceed that annual exclusion or
• 24:36
  Speaker 3: the standard deduction amount, and then it's called tax bunching.
• 24:41
  Speaker 3: You get that tax benefit, and then for the following
• 24:44
  Speaker 3: five years you're actually giving out of your donor advice
• 24:48
  Speaker 3: fund to your final charity. So again think of that
• 24:51
  Speaker 3: as an intermediate location. There's also things known as charitable
• 24:54
  Speaker 3: lead trust where income from the trust goes to charities
• 24:57
  Speaker 3: for a set term and then the remains passes to
• 25:00
  Speaker 3: your errors, which can reduce your taxable estate. Charitable lead
• 25:04
  Speaker 3: trusts are also known as what would call split trusts,
• 25:06
  Speaker 3: which are also a charitable remainder trust. Fit into the
• 25:09
  Speaker 3: same kind of category where there's split interest, where there's
• 25:13
  Speaker 3: some going to charities, there's some going to beneficiaries. So
• 25:16
  Speaker 3: there's quite a few rules and restrictions on that, but
• 25:19
  Speaker 3: the concept here is you can do these outright gifts
• 25:23
  Speaker 3: to charities that may or may not impact you on
• 25:26
  Speaker 3: your taxes. You can do it to donor advice fund,
• 25:28
  Speaker 3: to tax bunch and try to get over the standard deduction.
• 25:31
  Speaker 3: You can do larger amount and a charitable lead trust
• 25:34
  Speaker 3: or charitable remainder trusts. And finally there's these things called
• 25:37
  Speaker 3: qualified charitable distributions known as qcds. For anybody who is
• 25:42
  Speaker 3: pre tax retirement money end is over seventy and a half,
• 25:45
  Speaker 3: so a lot of different ways to benefit charities and
• 25:49
  Speaker 3: potentially reduce your taxable income. Unfortunately, everybody, this is going
• 25:55
  Speaker 3: to sound very like selfish, but this has gotten a
• 26:00
  Speaker 3: lot more complicated over the years. Eric can attest It
• 26:02
  Speaker 3: used to be like, oh yeah, I give the charities
• 26:04
  Speaker 3: and get a deduction, and you know ninety percent of
• 26:06
  Speaker 3: the time you'll get a tax benefit. Now it's you
• 26:09
  Speaker 3: gotta know how and from where and at what age,
• 26:13
  Speaker 3: and it just has gotten way more complicated. Now there's
• 26:17
  Speaker 3: still big benefits. If you know how to do it,
• 26:19
  Speaker 3: you can get a large tax benefit, but unfortunately it
• 26:23
  Speaker 3: drives a lot more people to professionals like us. So
• 26:26
  Speaker 3: if you have any questions about this, just reach out
• 26:28
  Speaker 3: after the show.
• 26:28
  Speaker 1: I will say the center console on my car is
• 26:31
  Speaker 1: much cleaner since they made this change. I don't have
• 26:33
  Speaker 1: to go through Saint Vinie's, I don't have to stick
• 26:35
  Speaker 1: a receipt in there anywhere.
• 26:36
  Speaker 2: But that's that's all. That's all for the.
• 26:40
  Speaker 1: And as you mentioned to CJ, a previewed upcoming show
• 26:44
  Speaker 1: as well, if you want to be part of that
• 26:45
  Speaker 1: upcoming show, you can email in of course for the
• 26:47
  Speaker 1: listener question corner love to get your question answered right
• 26:50
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• 26:52
  Speaker 1: dot com, you can submit a question to be answered
• 26:55
  Speaker 1: right here.
• 26:55
  Speaker 2: On the program.
• 26:56
  Speaker 1: Speaking of class financial dot com, great website resource to
• 26:58
  Speaker 1: learn about everyone at Claws Financially.
• 27:00
  Speaker 2: You can also set up an appointment online or pick
• 27:02
  Speaker 2: up phone.
• 27:02
  Speaker 1: Give a call six soh eight four four two five
• 27:04
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• 27:07
  Speaker 1: going to cost you a thing. It'll be complimentary to
• 27:08
  Speaker 1: you at Coss Financial again their number six oh eight
• 27:11
  Speaker 1: four four two five six three seven. Want to hold
• 27:13
  Speaker 1: on to that telephone number because it's time now for
• 27:15
  Speaker 1: the CSS Quiz Question of the week. It works like this,
• 27:17
  Speaker 1: just a moment, I'll ask you the class Quiz question leak.
• 27:19
  Speaker 1: You'll then have thirty minutes from the end today's program
• 27:21
  Speaker 1: to call the Class Financial Office right here in Madison
• 27:23
  Speaker 1: at six oh eight four four two five six three seven.
• 27:26
  Speaker 2: If you are the first call correct.
• 27:27
  Speaker 1: Answer, win this week's prize, which is a twenty five
• 27:29
  Speaker 1: dollars gift card to Sephora. This week's closs quiz question week,
• 27:33
  Speaker 1: Is this true or false? In twenty twenty five, you
• 27:38
  Speaker 1: can gift up to nineteen thousand dollars per recipient without
• 27:42
  Speaker 1: triggering federal gift tax reporting. Is that true or is
• 27:46
  Speaker 1: that false? Teleph number six O eight four four two
• 27:49
  Speaker 1: five six three seven.
• 27:50
  Speaker 2: Don't forget.
• 27:50
  Speaker 1: That's cost Financial Office right here in Madison again the
• 27:53
  Speaker 1: number six oh eight four four two five six three seven.
• 27:56
  Speaker 5: C J.
• 27:56
  Speaker 2: Eric. It's always great talking with both of you guys.
• 27:58
  Speaker 2: Have a great day.
• 28:00
  Speaker 3: Thanks Sean.
• 28:01
  Speaker 5: Thanks Sean.
• 28:01
  Speaker 1: Doctor Mardi Greer joins us next here on thirteen ten
• 28:04
  Speaker 1: Double You IV eight