Many families choose to spend their Thanksgiving Holiday volunteering at soup kitchens, food pantries, or other shelters. While this is a great time of year to do so, we know that these facilities are overwhelmed with volunteers during the holiday season and then in great need of volunteer and monetary support the rest of the year when families have gone back to their day-to-day lives. Volunteer work such as this is such a great way to teach your children gratitude, financial responsibility, and to recognize there are many in need this week and all year round.
Volunteering and giving are great opportunities to build family unity. Bob Graham, Founder of the Namaste Foundation has discussed that in his career as a CPA he worked with clients who had inherited wealth. “I noticed the tremendous insecurities many had,” says Bob. “They lacked confidence in their ability to earn money on their own and were fearful of losing money – almost to the point of being incapable of managing it or even of responding to professional advice.” When he founded Namaste, he involved his children in the operations and later management so that they would learn financial and social responsibility. One of the gifts he gives his children at the holidays is a sum of money that they are then required to give to a charity of their choosing. I am starting this tradition with my children this year!
Here are some guidelines to keep in mind when gifting to charity this season:
Household items. These must be in good condition or better in order to qualify for a deduction, unless you are donating an item with a value of over $500 and have a qualified appraisal. If the value of your donated household items exceeds $250, you must have a written receipt from the charity that describes the items. If the total of your non-cash contributions exceeds $500, you will need to complete a Form 8283 and attach it to your tax return.
Money. You must have a written receipt or bank statement for any donation of money to a charity, regardless of the amount. You can gift via cash, check, credit or debit card. If you donate via credit card in December but don’t actually pay that off until January, you can still take the deduction on your 2019 tax return. If you donate via payroll deduction, you’ll need a W-2 wage statement or other documentation from your employer that shows the total amount donated in 2019.
Qualified charity status. Only eligible charities qualify for a deduction. You can check the eligibility on the IRS website by going to https://apps.irs.gov/app/eos/
Here are guidelines when gifting to your own family members this season:
Annual exclusion. You are allowed to gift up to $15,000 in cash, property or other assets to any one person without having that count toward your lifetime gift tax exemption. If you are married, you can donate up to $30,000 as a couple to as many people as you want, as long as the total given to each does not exceed $30,000. You do not even have to be related to the recipient. Plus, limits on gifts to spouses don’t apply.
Funding for college plans. Contributing to a child or grandchild’s college education is a gift that keeps giving forever. Contributions to a Section 529 education savings plan can be made up to the annual exclusion amount as well. Money in these plans grows tax-free and is allowed to be withdrawn tax-free as long as the funds are used for educational purposes.
Other gifts. If you pay someone’s tuition or medical expenses (including health insurance premiums) directly to the service provider, this will not count against your annual exclusion or lifetime gift tax exemption. As long as it is paid direct to the provider, you won’t have to file a gift tax return.
These are all great options, especially for grandparents looking for a productive way to gift to their children or grandchildren. There are also constructive ways to use gifting to reduce a taxable estate!
If you are spending the upcoming holiday with older family members, this is actually a great opportunity to talk about planning with them. While there are few “perfect” times to talk with parents about their estate plan, the relaxed times you spend together on vacation or downtime during the holidays can be one of them. You have the benefit of having everyone together sitting down in one place. So take advantage of that!
Here are some tips on how to bring up this critical conversation:
Find a good place to start. One of the best ways to ease your parents into a financial discussion is to bring up your own. Tell your parents that you were looking into your own estate plan and wondering if they had already executed their own. You can let them know that you have learned that the different types of plans require very different levels of effort from the executor and cost from the estate and that you want to be prepared to know what to expect. If nothing else ask for the to tell you who they have put in charge.
Take it easy. If you feel that your parents may need extra help and support with organizing their financial lives, be reassuring rather than applying pressure. Let them know that you want to make sure their fi nancial independence is kept intact for as long as possible. Take things one step at a time, such as extending an offer to help them use online bill pay or assist them with organizing their information at tax time if they are not tech savvy. Share with them your asset tracking and bill pay spreadsheet that was prepared as part of your planning. If you haven’t done your planning yet, reach out to me and I will be happy to share the sheet with you!
Respect boundaries. Many parents feel uncomfortable discussing their finances with their children. If you face this obstacle, let your parents know that you don’t need to know the amount or particular details of their accounts if they aren’t comfortable, but you at least need to know where to find their important documents when it becomes necessary, but that you aren’t attempting to control them in anyway. You simply want to help and make things as easy as possible for you and your siblings when something does happen.
What is a Personal Family Lawyer®? A lawyer who develops trusting relationships with families for life.