Cents and Sensibility
Cents and Sensibility
What size does she wear? What color does he like? Does she already have one of these? Investments just may
be the perfect giftIf you find yourself asking these questions when shopping for those special people in your life, here's an idea: Forget the retail stores; instead, provide a future of limitless possibilities by giving an investment as a gift.
With time, even a small investment can grow to provide a down payment for a car, a special vacation or an attractive nest egg.
For those younger people on your shopping list, gifting into a college advantage 529 plan can help an aspiring teacher, doctor or veterinarian realize his or her dream.
When you gift an investment, the recipient may not be the only one who benefits. You, as the donor, may benefit from reducing your estate and income tax on assets gifted.
When you gift investments, your estate is directly reduced by the total amount gifted. So, if you give $3,000 each to three recipients, your estate is reduced by $9,000.
You can gift up to $11,000 in 2002 per individual recipient and avoid filing a gift return or incurring a gift-tax liability.
If you have children whom you'd like to help buy a house, car, etc., gifting can be a terrific way to lend a helping hand. For the investment to be considered a gift, you must give up control of the investment. This means the recipients can do as they wish with the gifted dollars.
Payments made directly to an educational institution providing education for the recipient and payments made directly to a medical institution providing medical care for the recipient are not considered gifts when figuring the annual exclusion.
Giving an investment as a gift does not generate a deduction for the giver or income for the recipient (unless it is a charitable donation to a qualified charity). No gains or loses are realized when gifting. These occur only when the investment is sold.
There are many ways to give an investment as a gift. A qualified tax professional can provide all the necessary details. It's important to consult a professional before gifting an investment because the laws concerning trust and custodial accounts can be complicated, and charitable giving and gifts to minors may have different tax implications.
In addition, some states have a 36-month lookback rule that cancels any gifts made while trying to qualify for Medicaid.
Once you've learned all the facts, you'll realize the full benefits of giving investments, both for you and the person receiving the gift.
Guy Steele is a financial planner and head
of the Pali Palms office of Edward Jones. Send
planning and investing questions to him at 970
N. Kalaheo Ave., Suite C-210, Kailua, HI, 96734,
or by email at: gsteele2@pixi.com