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Presented by MidAmerica Financial Resources. You can reach them at 618.548.4777 or greg.malan@lpl.com or on the web at www.mid-america.us

 

The Gift Tax

The Gift Tax
Not all gifts are taxable.

Provided by MidAmerica Financial Resources

 

I’d like for you to meet my friend, Hugh. He’s a retired film stuntman who, after a long career, is enjoying his retirement. Some of what he’s enjoying about his retirement is sharing part of his accumulated wealth with his family, specifically his wife and two sons. Like many Americans, Hugh likes to make sure that, when he’s sharing that wealth, he isn’t giving the I.R.S. any overtime.

 

Hugh knows about the gift tax and knows how to make those gifts without running headlong into a taxable situation. This is Hugh’s responsibility because the I.R.S. puts the onus on the giver. If the gift is a taxable event and Hugh doesn’t pay up, then the responsibility falls to the beneficiaries after he passes in the form of estate taxes. These rules are in place so that Hugh can’t simply, say, give his entire fortune to his sons before he dies.

 

Exemptions for family and friends. It would be different for Hugh’s wife, Barbara. The unlimited marital deduction means that gifts that Hugh gives to Barbara (or vice versa) never incur the gift tax. There’s one exception, though. Maybe Barbara is a non-U.S. citizen. If so, there’s a limit to what Hugh can offer her, up to $155,000 per year. (This is the limit for 2019; it’s pegged to inflation.) 1,2

 

The gift limit for other people is $15,000 and it applies to both cash and noncash gifts. So, if Hugh buys his older son Tony a $15,000 motorcycle, it’s the same as writing a $15,000 check to his younger son, Jerry, or gifting $15,000 in stock. Spouses have their own separate gift limit, as well; Barbara could also write Jerry a $15,000 check from the account she shares with Hugh.1,2

 

Education and healthcare. The gift tax doesn’t apply to funds for education or healthcare. So, if Tony breaks his leg riding that motorcycle, Hugh can write a check to the hospital. If Jerry goes back to college to become a chiropodist, Hugh can write a tuition check to the college. This only works if Hugh is writing the check to the institution directly; if he’s writing the check to the beneficiaries (i.e. Tony and Jerry), he might incur the gift tax.1,2

 

The Lifetime Gift Tax Exemption. What if Hugh were to go over the limit? The lifetime gift tax exemption would go into effect, and the rest would be reported as part of the lifetime exemption via Form 709 come next April. Unlike the annual exemption, the lifetime exemption is cumulative for Hugh. Currently, that lifetime exemption is $11.4 million.1,2

 

Being a stuntman and an active extreme sportsman, Hugh is concerned about his estate strategy. Were he to borrow Tony’s motorcycle and attempt to jump the Snake River Canyon, what would happen if he didn’t make it across? If that unfortunate event occurred in 2019, and he gave $9 million over his lifetime, and his estate and all of that giving totaled more than $2.4 million, the estate may owe a federal tax and possibly a state estate tax. Barbara would have her own $11.4 million lifetime exemption, however, and since she is the spouse, estate taxes may not apply.1,2

 

Any wise stuntman will tell you, “leave this to the experts.” Talk to a trusted financial professional about your own plans for giving.

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com www.mid-america.us

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities and advisory services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC.
MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to LPL.

 

 Citations.

1 – thebalance.com/gift-tax-exclusion-annual-exclusion-vs-lifetime-exemption-3505656 [2/9/2019]
2 – cstaxtrustestatesblog.com/2018/11/articles/estate-tax/2019-estate-gift-tax-update/ [11/19/2018]

Money Tips for Newlyweds

Money Tips for Newlyweds
Ideas to Help Manage Stress.

Provided by MidAmerica Financial Resources

 

In a recent study, 35% of married couples described money issues as their primary source of stress. While there are many potential causes of such financial stress, in some cases the root may begin with habits formed early in the marriage.1

 

Fortunately, couples may be able to head off many of the problems money can cause in a marriage.

 

10 Tips for Newly Married Couples

 

Communication. Couples should consider talking about their financial goals, memories, and habits because each person may come into the marriage with fundamental differences in experiences and outlook that may drive their behaviors.

 

Set Goals. Setting goals establishes a common objective that both become committed to pursuing.

 

Create a Budget. A budget is an exercise for developing a spending and savings plan that is designed to reflect mutually agreed upon priorities.

 

Set the Foundation for Your Financial House. Identify assets and debts. Look to begin reducing debts while building your emergency fund.

 

Work Together. By sharing the financial decision-making, both spouses are vested in all choices, reducing the friction that can come from a single decision-maker.

 

Set a Minimum Threshold for Big Expenses. While possessing a level of individual spending latitude is reasonable, large expenditures should only be made with both spouses’ consent. Agree to what purchase amount should require a mutual decision.

 

Set Up Regular Meetings. Set aside a predetermined time every two weeks or once a month to discuss finances. Talk about your budgeting, upcoming expenses, and any changes in circumstances.

 

Update and Revise. As a newly married couple, you may need to update the beneficiaries on your accounts, reevaluate your insurance coverage, and revise (or create) your will.

 

Love, Trust, and Honesty. Approach contentious subjects with care and understanding, be honest about money decisions you know your spouse might be upset with, and trust your spouse to be responsible about handling finances.

 

Consider Speaking with a Financial Advisor. A financial advisor may offer insights to help you work through the critical financial decisions that all married couples face.

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com www.mid-america.us

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities and advisory services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC.
MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to LPL.

 

Citations.

1 – cnbc.com/2018/07/10/five-money-mistakes-that-can-destroy-a-marriage.html [7/11/18]

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