The Tax Advantages of Giving Gifts | 497

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Giving Gifts

Learn how giving gifts to your children can be 100% legally non-taxable! Discover your key action when making charitable contributions and how to control the non-taxable gifts granted to children.

Giving Gifts

What You Will Learn About The Tax Advantages of Giving Gifts:  

  • What year and tax planning, estate planning, charitable gifts, and giving gifts to your children are
  • Why you have to complete them by December 31st
  • The key thing for people to do whenever they’re making philanthropic contributions
  • How to control non-taxable gifts granted to children

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Transcript:

Matt Theriault: Hey, Rockstar. If you have a question here for Tim, that you’d like him to answer on this show, anything tax related, anything asset protection related, go to taxhacker.com/questions. Post your question in there and we’ll answer live, right here on Tax Hacker Tuesday. Enjoy the show.

Speaker 1: This is Theriault Media. Did you know that up to 50% of your lifetime income will be wiped out by taxes? What if you could stop this madness? Isn’t it about time you play on a level playing field with the wealthiest 1%? Now you can. Tim Berry, attorney at law, shares here, each and every week, current tax-exempt strategies that anyone can implement to hack the tax code. Protect your assets and keep what’s rightfully yours. It’s time for Tax Hacker Tuesday.

Bernie Gartland: Hey. I want to talk about four concepts.

Tim Berry: Okay.

Bernie: First concept, year-end tax planning. Estate planning. Charitable gifts.

Tim: Mm-hmm (affirmative)-

Bernie: And, gifts to your children.

Tim: Mm-hmm (affirmative)-

Bernie: Can you speak intelligently on all of those.

Tim: Sure. They’re all the same concept really. At the end of the day, they’re pretty much the exact same thing. What Bernie’s talking about is December 31st is looming large. It’s coming up really fast, and in order for you to make completed gifts for either the tax donations for a charitable contribution or the gift tax savings for the kids, you’ve got to make those gifts completed by December 31st. Is that what you were talking about, Sir?

Bernie: That’s what I was talking about.

Tim: Okay. Why would somebody want to make a gift to charity, for example? Besides helping out their favorite charitable cause?

Bernie: Let me see what … Tax deduction be appropriate?

Tim: A tax deduction.

Bernie: Yeah.

Tim: You can create all sorts of tax deductions by making the charitable contributions, but here’s the big thing, Bernie. The other day what were we talking about the key thing for people to do whenever they’re making charitable contributions?

Bernie: To make sure that they get the charitable tax deduction and the other people get the tax consequences.

Tim: Very profound. To make sure the individual giving the gift, gets the tax deduction and the other people get the tax consequences. What’s Bernie mean by that? Am I going to translate, or are you going to explain it?

Bernie: What do I mean?

Tim: Well, here’s the thing-

Bernie: Let me ask you a question.

Tim: Yeah.

Bernie: If I have $100,000.00 in stock, and my bases that I paid for it is $50,000.00, I could sell that stock and then I could give that $100,000.00 to the charity. Is there a better way to do it than that?

Tim: Yeah, because if you sell that stock, you’re going to have a tax hit of probably about $7500.00, roughly. Depends on different situations, but let’s say that’s going to cost you $7500.00 in taxes, if instead you just give the stock itself directly to the charity, you don’t get hit with a tax bill. The charity, the non-profit, the tax-exempt entity, gets hit with the tax bill, and since it’s tax-exempt it doesn’t have to pay taxes. And you still get the same $100,000.00 deduction. That’s the better way to give to a charity, is by giving appreciated assets to your favorite charity.

Bernie: What’s it all have to do with tax planning for the end of the year? And, any other year that you want to know. What about giving dollars and dollars and dollars to your children outright? How much can you give to your children each year?

Tim: You can give to the kids, each year, about $14,000.00. And I say about, using the weasel word about because that’s for inflation. 2015’s coming up, it may or may not go up, but at that point in time, but each year you’re allowed to give, each person who you want to, $14,000.00 without there being a gift tax cut. If you’re married, and you have one kid, husband and wife, $14,000.00 each, can give $28,000.00 to their kid, if they only have one kid. If they have two kids, that’d be $56,000.00.

Bernie: Tax-free.

Tim: Tax-free. Gift tax-free. No income taxes either.

Bernie: Think about this for a minute. If you gave that amount to the children on 11:00 PM on December 31st, can you give the same amount on January the 1st, the morning of January the 1st?

Tim: Absolutely you could. What a great stocking stuffer?

Bernie: Well, but there’s the problem. Those children may go out and spend all that money, which mom and dad may want that, however, what about if mom and dad want to make that gift, the non-taxable gift, but want a little control over what the children can do and not do. What happens then?

Tim: It’s all about that key phrase control versus ownership. What mom and dad could do, is they can set up a trust, put the assets into the trust, gift the assets into the trust for the benefit of the kids, use up that gift tax exclusion, and yet mom and dad can still control the trust, be the trustees of the trust so if the kids go out there and do any of the stuff I did as a kid, mom and dad can yank the money right back.

Bernie: Is it fair to say that you have done this in some of your family matters?

Tim: Well, Bernie, it’s really funny you say that because here’s the thing if you set up the trust properly, it’s taxable to the kids. I have a daughter who doesn’t live in the people’s republic of California, and so my daughter has certain assets inside of a trust for her benefit that is not subject to taxation in California, now. It’s a wonderful thing.

Bernie: It goes back to what we said with the last podcast. What we advise people to do, first of all, is totally legal, and second of all, we implement our own plans. We implement all the information that you’re getting today, have been implemented by our staff and the principles involved here. It’s a good thing, isn’t it?

Tim: You Martha Stewart?

Bernie: I’m Martha Stewart. It’s a good thing. It’s better than Lois Lerner, isn’t it?

Tim: It is, Sir. It is.

Bernie: Anyway, with those words of wisdom, I think it’s what we call it … A wrap.

Tim: We’re talking about gifts, aren’t we? It should be a nice little bow.

Bernie: Oh.

Tim: And wrapped up.

Bernie: A wrap and a bow, and everything. Anyway, you have it. It’s legal. It’s tax planning. It’s year end tax planning, it’s estate planning, and it’s gifting to children, non-taxable, and also in a way that if you want, it could be controlled and yet have the tax situations that are favorable to yourself. Tim, until next time. We got that gift wrapped. There you are folks, it’s a wrap.

Tim: Thank you, everyone.

Bernie: Bye.

Speaker 1: That’s it for today. As we dream of a tax system that works just for you, but until then you have Tim Berry. See you next Tuesday for another episode of Tax Hacker Tuesday.

Matt: Hey, whenever you’re ready to have Tim customize a Tax Hacker Blueprint for you, a special custom blueprint just for you, go to taxhacker.com, answer a few questions about your situation, tell Tim what you’d like to have happened and then his team, they’ll take it from there. Then, they’ll give you a copy of his free book. His free book, all around Trump’s new tax plan. Specifically, what the press isn’t telling you. Go to taxhacker.com and we’ll see you right here, next week. Taxhacker.com. Take care.