Senior Gift Giving Tips – Make your year-end gifts tax efficient

Senior Gift Giving Tips – Make your year-end gifts tax efficient

When a tax year winds down, seniors with funds make donation and gift moves as part of estate management. Being tax-efficient with your moves makes sense. Here are some ideas.

Senior Gift Giving Tips

One of the potential benefits of your retirement years is having funds available to help others work through the challenges of life. As you consider gift giving prior to the end of the year, here are some tips to make your giving strategy more tax efficient.

Know the annual gift limits. If providing funds as a gift you are limited to $14,000 in 2016 (and 2017) before the gifts need to be reported to the IRS. This limit is per individual, so both you and your spouse can provide $14,000 (total of $28,000) per person per year. But you need to proceed with caution, a birthday or holiday gift can accidently cause an excess gift total if given in addition to an annual gift of cash.

Direct contributions to charities. With the passing of the PATH act in late 2015, seniors who are age 70 ½ or older may make direct contributions to charities from qualified retirement plans like a Traditional IRA. There is an annual limit of $100,000. If you plan to give to a charity why not consider this alternative. It may create other tax benefits depending on your situation.

Helping pay for college. Consider donating to a grandchild’s college directly or through a college savings plan like a 529 plan. Using the gift limits mentioned earlier, you can donate up to $14,000 per year per individual. Are you a new grandparent? Get your child to open the 529 plan for their newborn so you can make deposits to the account over time.

Avoid the tax torpedo. When you reach 70 ½ years old, you will trigger the annual minimum distribution requirements on many of your retirement plans. Know which ones will be triggered and determine if pulling some funds out of these plans now can be more tax efficient, versus when you are required to do so at an older age. This planning can save thousands of unwanted taxes and provide tax efficient gifts for others.

These are but a few ideas to use as tax-efficient gift giving strategies as you get older. There are many others, so it often makes sense to set up an appointment to review your options.