Welcome! We are pleased you have interest in learning about the many benefits of charitable gift planning. To speak with someone in the Center for Gift and Estate Planning about ways to benefit through a planned gift, call 330-672-1000 or email us at email@example.com. A member of our Planned Giving Team will be very pleased to help you.
Monetary Gifts: Give to Grandkids Without Undermining Retirement
Talk to your financial representative about including gift giving in your overall financial plan. He or she can help you:
- Determine how much you can afford to give. Tell your financial representative what you would ideally like to gift, and then ask him or her to run different scenarios to see what can be achieved without compromising your vision for your own retirement.
- Consider taxes as you plan your gifting strategy. The last thing you want is to weigh down your grandchildren, children or yourself with the burden of paying taxes on your gifts. So look for tax-efficient ways to be generous.
- 529 education funds. If your goal is to help fund college education, you can make contributions to a 529 plan. While the contributions you make to the account are not deductible on your federal taxes, many states offer income tax deductions for 529 income plan contributions. In all cases, the account earnings will grow tax free and will not be subject to federal tax when used to pay for college.
- Permanent life insurance. Over your grandchildren's lifetime, the policy will accumulate cash value, which grows tax deferred and becomes a source of funding they can use to help pay for college, a wedding or a mortgage. Life insurance death benefits are also generally tax free.
- Cash. You can gift up to $14,000 a year to an unlimited number of individuals tax free. Married couples can gift up to $28,000 per year. If you give more than that amount to any one person in a single year, you'll have to report the gift to the IRS, although you won't pay federal tax on gifts of cash unless or until your lifetime of giving (including your estate) exceeds $5,490,000.
- Decide if you want to place conditions on your gift. If you plan to give your grandkids an outright gift of cash, do you care when they get the money or how they spend it? If you want to place conditions on your giftor incent responsible behavioryou may want to set up a trust. An attorney can set up a trust for you that imposes any legally allowable condition on your gift. You could require, for example, that the child maintain a certain GPA in college or be fully employed by a specific age before the trust makes a distribution.
Excerpted from an article by Rebekah Barsch, executive officer and vice president of Planning and Sales at Northwestern Mutual.