Gifts – It’s Okay to say “No”

I’m always a little nervous about sharing this particular opinion, especially during this time of year; because of the passion people seem to have about gift giving. I find myself wondering if they’re truly caught up in the spirit and overwhelmed with generosity, or do they feel an overpowering sense of duty to give because they “know” they’ll be getting something and/or it’s expected. Maybe there is a little bit of both going on.

Financial professionals don’t make it much better, do we – with our thoughtful and creative ways to save on gifts or options to earn some extra income during the holidays to afford our generosity. I’d like to offer a different take, and I will be the first to admit it may not be very popular. Instead of worrying about what to buy or how much you should spend, instead agree not to give gifts. Has anybody else ever wondered how many more toy cars their kid really needs, or when you would find an occasion to wear the outfit you were given? Right about here is when I’m usually being called a Scrooge or told that I don’t understand the meaning of the season.

I’m not religious, and I’m not taking this down that rabbit hole – that’s a whole other topic better left alone. And don’t misunderstand my intention; I’m certainly not saying you shouldn’t be generous or thoughtful – but I challenge you to do so in a way that doesn’t affect your wallet. Below are some options I’d like people to consider, because I think they meet the underlying intent of the season – to let those you care about know how you feel.

Provide an experience. Does your loved one reminisce of days gone by, or talk about how much they enjoy the fall foliage or snow? Recreate some of those memories – carve some time out of that busy schedule to just “be” with the person. Perhaps you go out for a hot chocolate and stop at a local pond to watch the ice skaters; or you just drive the back roads with no particular destination in mind – just looking at the changing leaves (I’m from New England – it’s amazing if you’ve never had the opportunity). Or maybe they love animals – volunteer with them at a shelter or animal rescue.

The point is to take a step back from the material world. This is not going to be for everyone, I admit that. And it will probably feel weird and/or forced at first. But think about what you would like somebody to do with you, or in your name; then turn it around and imagine the same thing for those you care about. This time of year doesn’t have to be stressful and expensive. You don’t have to dread January, already thinking to yourself what you’re going to resolve so this doesn’t happen again. Sometimes all it really takes is a K.I.S.S. (keep it simple, silly.). : )


Holidays and Gifts

It’s getting to be that time of year, when people’s hearts swell with generosity and good will. This often translates into the desire to make donations to charities, or substantial gifts to friends and family – without much thought put towards tax efficiency or how it can fit into an overall plan (am I a mood killer or what?!). So this article is going to focus on a few things people can do to make sure their gifts do the most for them as well.

Currently the annual gift tax exclusion is $14,000 per taxpayer per gift to individual. This means you can give $14,000 (cash or other assets) to as many people as you would like, and not have to file a gift tax return. If you exceed this amount in any given year; you won’t necessarily have to pay any taxes, but you will have to file a gift tax return the following year. Taxpayers have a lifetime exemption of over $5M ($5.43M to be exact), which seems like quite a bit but when considered relative to  60+ years of gifting it’s easy to see how it may be exceeded.


Contributing to 529 plans can serve dual purposes, if you have a state income tax – saving towards college and reducing your taxable income with the state. Or, if the family member is already in college; you could pay the tuition to the school directly. This does NOT count towards your annual gift tax exclusion, so if you were feeling really generous you could not only pay for the semester you could also gift the student $14,000 and not have to file a gift tax return.


Frequently I’m asked if a family should make a gift of long held investments, because they don’t “need” them for their own plan. The down side to making a gift of any long held stock or mutual fund is the amount of gains it has earned since you purchased it. These gains will be passed to the family member, and they will be responsible for any capital gains. A better solution, if the money isn’t needed right away, would be to pass it to them when you pass away – because the basis will reset.

For example, you own $100,000 of Facebook stock, which you bought for $10,000. If you gift the stock outright to your child, and then they sell it, they will owe taxes on $90,000 of capital gains. However, if you pass it to them upon your death, and they sell it for $100,000, they will not owe any taxes at all – because the basis will reset from $10,000 to $100,000.

Charitable Giving

Donations to charities do not count against the gift tax exclusion, and they can give you a tax deduction – win/.win. However, you need to ensure the donation is made no later than 31 December of the year you would like to claim the deduction for. If mailing a check, it must be postmarked before 31 December, regardless of the date on the check itself. I’ve seen people with the best intentions wait until after the new year to mail their donation, with the check dated the week of Christmas – but because it was postmarked after 1 January it counted for the new year. Taxpayers can use the IRS’ online search tool to verify the organization they have, or would like to, donate to is tax-deductible.

Recently the donation of required minimum distributions (RMDs) have been authorized. This could be appropriate for individuals and families who do not “need” the RMD. The advantages to this, instead of taking the RMD and then donating it to charity, is it’s not counted towards your adjusted gross income (AGI). For example, your income after social security and pensions is $80,000, and your RMD is $80,000. This would increase your taxable income to $160,000; putting you into another tax bracket – ouch! If you don’t itemize your deductions you wouldn’t receive any benefit from taking the RMD and then donating it to charity. However, if you donated the RMD to charity directly from your IRA (not your 401k) then your taxable income remains at $80,000. Here’s the catch – you need to be 70 1/2 AND you can only donate from your IRA, RMDs cannot be taken from 401ks.

 This is not an all-inclusive list of ways to give and save on taxes, but it is some of the more common themes I’ve run into over the years. Gifting is personal, nobody should be telling you what or how much to give; however I believe everyone deserves to know their options. Now is the time to sit down with your Advisor, before the holiday rush is upon us. Plan out your giving, it doesn’t make you any less generous and ultimately may allow you to give more.