Sand Hill's Chief Investment Officer, Brenda Vingiello, CFA, joins Jenny Harrington on “Halftime Report” to go over their most recent portfolio moves. Brenda's commentary begins
Gift Ideas
Published Date : February 19, 2015
For those who want to pursue inter-generational transfers of wealth to assist their family while they are still living, two rather simple techniques stand out for their general ease and effectiveness; annual exclusion gifts and 529 plan contributions. Both offer significant help to children and grandchildren, and provide meaningful estate planning opportunities. Direct gifting may ultimately create control issues when the given funds are released to the child (or grandchild) at the age of majority. And yet, this approach offers donors and parents a wonderful opportunity to teach children responsibility with “their own” money, as well as access to resources for things beyond the higher education objectives of 529 plans.
For example, since housing is financially out of reach for many young people coming of age, steadily accumulating and growing many years of annual gifts provides a real opportunity to help the beneficiary realize this goal of home ownership. By earmarking funds and emphasizing the importance along the way that such assistance should be relied upon for this and other meaningful and desirable goals, the accumulated funds are more likely to be protected from being spent on less worthy pursuits. Regardless of how the gifts are ultimately spent, the donor(s) are still likely to benefit from the reduction in the size of their own estate and beneficiaries will benefit from years of accumulation and returns.
529 plans also offer attractive and simple ways to transfer wealth, especially where funding higher educational expenses is concerned. One of the compelling features of these plans is that the donor(s) can make larger one-time contributions by accelerating up to five years’ worth of their annual gift-tax exclusion amounts. For example, two grandparents could give $70,000 each (the current $14,000 annual exclusion times 5 years) to each and every one of their grandchildren. If two grandparents had six grandchildren, their combined gift could be as high as $140,000 each, thus immediately eliminating $840,000 from their own estate. This strategy is especially attractive to grandparents with multiple grandchildren, plenty of remaining assets to rely upon, and a desire to reduce the tax impact on their estate. Though such gifts are not charged against their Lifetime Exemption amount, they do preclude further annual exclusion gifts to the named beneficiaries for the five years advanced. However, care should be taken about the timing of gifts and condition of the donor, to avoid any potential “deathbed” contributions and funds being pulled back into the donor’s estate.
Still, 529 plans are designed to assist with college or higher level education, and cannot be used to cover potentially expensive elementary or high school tuition. Knowing this (and acknowledging that there may be limits to gifting ability), along with the real possibility that broader assistance may be needed with earlier education expenses or other early life needs of beneficiaries, choosing how best to optimize annual exclusion gifts is important. Furthermore, direct tuition payments at all educational levels can also be made by donors without impacting their annual exclusion gift or their lifetime exemption amounts. Depending upon overall resources, thinking strategically about how to optimize gifting methods is a key ingredient in effective estate planning. Everyone’s situation is different, though, and these general observations are meant to stimulate careful thought about the available choices.
Articles and Commentary
Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
Video Presentations
All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
Other Posts By This Author
- – Fiscal Sponsorship for Charity
- – Risky Business
- – Emotional Rescue
- – Children in Cars Getting Coffee… or Anything Else
Related Posts
Recent Posts
