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Cents and Sensibility Guy Steele |
This Mother’s Day, you
could give a gift that lastsIt's almost Mother's Day. This year, instead of giving Mom flowers or candy -- or at least in addition to the flowers or candy -- why not give a gift that can last? Specifically, why not help your mother -- or your grandmother -- improve her financial picture?
Of course, you could always just give a gift of cash, but there are many other ways to help out. You could, for example, give stocks. It isn't much more difficult than giving cash, but you do have to keep a few things in mind. Make sure you know what you originally paid for the stock (its "tax basis"), how long you've held it, and its fair market value at the date of the gift. You'll also need to determine if you have to pay gift taxes. (You can give up to $11,000 per year, free of gift taxes, to as many people as you want.) Your mother will need this information to determine gains or losses when she decides to sell the stock you've given her.
Both you and your mother can gain valuable tax advantages from your gift of stock. When you gave your mother the stock, you also gave her your "holding period" -- the amount of time you've held the stock. So, even if she only owns the stock for a day or so before selling it, she'll just have to pay the long-term capital gains tax rate, which may be considerably lower than her current income tax rate. And by giving your mother the shares of stock, you will also benefit -- because you'll avoid the capital gains taxes you'd have to pay if you sold the stock yourself. However, before taking any action, consult with your tax adviser to discuss these issues.
As an alternative to giving your mother shares of stock outright, you might also consider contributing to her IRA. She can put in up to $3,000 per year to a Traditional or Roth IRA -- and, if she's 50 or over, she can add an extra $500 in "catch-up" contributions.
If your mother is elderly and has health issues, she may be dealing with the high cost of prescription drugs. If so, consider taking over some of her pharmacy bills. You can make it easy for her by setting up a credit account, in your name, at her local pharmacy.
Another health-care-related issue you might want to think about is long-term care. Your mother may never need to enter a nursing home, but it's still a possibility for which you'll want to be prepared -- especially when you consider that the average cost of a year's stay at a nursing home is now around $50,000. And in some cities, it can cost almost twice that amount.
To help protect your mother's financial independence, you may want to encourage her to transfer the risk of paying for exorbitant long-term care costs to an insurance company. By purchasing a long-term care policy for your mother, you can cover nursing home stays, home health care and other costly services. If you're pondering this move, though, don't wait too long, because premiums increase with age.
By pursuing any of these ideas, you can provide your mother with a Mother's Day gift that can last long after the flowers have wilted and the candy is eaten. And if you don't want your father to get jealous, you could use any or all of these suggestions again next month for Father's Day.
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