Gifting With Purpose

Family portrait of Attorney Kent Phelps

An unexpected surprise Wendy and I experienced as we became parents of married children (and their spouses, whom we consider our own) and grandparents, is the utter delight we get out of helping out our married children and our grandchildren from time to time with some extra cash, stocking their pantries, clothing, paying for date night, dance lessons, swim lessons…  Don’t get me wrong, we were very intentional about raising our children to be independent, non-entitled adults.  Gratefully, so far, so good. 

We didn’t expect how much joy we would experience in gifting – for the very reason that they don’t expect it.  The fact that they are not entitled just makes us want to gift more.

We encourage our clients to give gifts during their lifetime.  If you’re going to give a gift, better to give it with a warm hand than a cold one.

Gifting to your loved ones during your lifetime allows you to see their delight when they receive the gift.  If you gift substantial assets, this also gives you the opportunity to observe where they are at in their relationship with money and to help you determine their ultimate inheritance.  This also provides an opportunity to teach them sound money management principles while you’re still around.

We are often asked how much our clients can gift without paying any gift taxes.  This is an important question since the gift tax rate can be as high as 40%.  And guess who pays the tax – the giver!

In 2023, you may gift up to about $13 million ($12.92 million, to be exact) during your lifetime without paying a gift tax.  This is the amount of your unified lifetime gift and estate tax exemption.  This means that if the total amount you gift during your lifetime, combined with the value of your estate at the time of your death, adds up to less than $13 million*, neither you nor your heirs will owe any gift or estate tax.

On top of this, you now have an annual $17,000 gift tax exclusion.  This means that you and your spouse may each gift up to $17,000 to as many individuals as you want this year with no gift tax and without reducing your unified lifetime gift and estate tax exemption.

For example, if you have two children, you may gift up to $17,000 to each child and your spouse may gift up to $17,000 to each child so that each child could receive up to $34,000, with no taxes and no reduction of your unified gift and estate tax exemption.  There is no limit to the number of individuals you may gift to.  You may gift up to $17,000 to as many individuals as you like in a given year, whether related to you or not. 

Amidst all the tax and financial considerations, don’t forget that you’re transferring your values along with transferring your money.  Give your gifts meaning beyond their purchasing power.

What, when, and how you gift communicates your values.  The Ultimate Gifts don’t have a “$” in front of them.  Gifts such as the gifts of work, friends, learning, family, dreams, gratitude, generosity, faith and love are far more impactful. (Nod to Jim Stovall’s wonderful book about how to give meaning to your money, The Ultimate Gift)

*The $13 million exemption is currently set to be cut in half to approximately $6.5 million in 2026.  Visit with one of our attorneys to understand the details of these complex tax laws and how they affect your personal situation.

© 2023 Trajan® Wealth LLC. Nothing in this blog is intended as investment advice, nor is it an offer to buy or sell any security. Please consult your financial advisor for questions about your personal financial situation. All investments involve risk, including the potential for loss. Trajan Wealth clients and employees may have a position in any of the securities mentioned. Portfolio holdings and other data are subject to change at any time and without notice. Additionally, the above links provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links.

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