Gifting now vs after passing away

rkser

Full time employment: Posting here.
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We gift several thousand $ each year to our 2 children (ages 40 & 32) in the form of VTI shares with their embedded capital gains from our taxable accounts.
Whenever they need the money they may sell them & pay the capital gains Tax.

We understand children will get a full step up when ever I & DW pass & not pay any capital gain taxes.

While giving with a warm hand vs cold one is thought to be better as the impact now is greater, it does come with the cost of taxes for them.

How do you gift, your thoughts ?
 
I am a believer in the warm hand. I gift $$ to our 4 sons on their birthdays. I also paid for the tuition of our 3 grandchildren.
Their gratitude was very heartwarming.
 
529 Plans helped children graduate loan free with their graduate degrees & are now being funded for the three grand children .
 
I have no kids but I wish my parents had gifted me something when I was younger and could have made use of it. I will presumably inherit a small amount at some point but eh it isn't going to make any difference to me now. I'm set where I am for good or bad.
 
We understand children will get a full step up when ever I & DW pass & not pay any capital gain taxes.

Note there is no basis step up unless the shares are owned by the decedent. Shares gifted prior to death so as to report under the recipient's tax ID will not get a step up.
 
The DW and I each gift the max to our DD each year up to the gift tax exclusion/limits. If we exceed the limits (bought her a house a few years ago) we just file form 709. No taxes due.

Happy to do it and I get to "see it do some good" especially since she isn't wasting it.
 
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Note there is no basis step up unless the shares are owned by the decedent. Shares gifted prior to death so as to report under the recipient's tax ID will not get a step up.
Please explain "Note there is no basis step up unless the shares are owned by the decedent".

:confused:

I & DW own the VTI in our respective taxable accounts, when both of us pass away, our children will inherit the taxable accounts 50% each,

I understand they will get the step up, please correct me if I am wrong
 
I have no kids but I wish my parents had gifted me something when I was younger and could have made use of it. I will presumably inherit a small amount at some point but eh it isn't going to make any difference to me now. I'm set where I am for good or bad.
I read recently that the average age of heirs inheriting assets from their parents is 60 years of age. As Badatmath said, that is not the age/ point in life when heirs NEED the additional money.

As others have stated here and as we have done for our kids, helping your kids now with covering expenses for grandchildren’s tuition, trips, summer camps, etc. is a more helpful way to go. Not to mention the joy we get from watching them enjoy and benefit from these gifts.
 
This Spring, I paid for a bathroom remodel for my daughter and her husband as an anniversary gift. They were thrilled!
 
I gave one daughter her education and the other one a house. In general, the money was equal. Mine and DW’s money is for protection against a long term disability. We hope there’s money left to give to our daughters, but we don’t have enough to give away much without risking our finances in later years. We certainly like to do things that involve spending money, but the amounts are not really material. DW and I are both under 70. Maybe we’ll feel comfortable doing more later. Depends on our health.
 
Please explain "Note there is no basis step up unless the shares are owned by the decedent".
:confused:
I & DW own the VTI in our respective taxable accounts, when both of us pass away, our children will inherit the taxable accounts 50% each,
I understand they will get the step up, please correct me if I am wrong

You wrote in your first message that you are gifting the shares now. Typically that means transferring them to a new owner now.
 
I helped pay 2/3rd of the cost of my son's home so that he could pay for it in cash. Every year I gift him the maximum without the need to report, into our joint brokerage account. The goal is to get his account to about a million dollars when he retires in 20 years or so. He should also inherit low to mid 7 figure sum from us when we are both gone.
 
I helped pay 2/3rd of the cost of my son's home so that he could pay for it in cash. Every year I gift him the maximum without the need to report, into our joint brokerage account. The goal is to get his account to about a million dollars when he retires in 20 years or so. He should also inherit low to mid 7 figure sum from us when we are both gone.
Does he know what you plan to leave for an inheritance?
 
Does he know what you plan to leave for an inheritance?
Yes. He is on the autism spectrum and is very high functioning. Very intelligent but unable to really make a living. He knows I have his back, and it is very important for him to feel financially secure. He is extremely frugal which really hurts (me). He can spend more but he doesn't.
 
We gift three ways...cash from checking to my nephew and his wife and to some charities, politcal candidates and occasionally isolated GoFundMe requests from checking. Most charities via our DAF and our individual QCP's.
 
I gave my one son $$$ for a down payment on a home. I adjusted the beneficiary division of assets between him and his brother to reflect the gift.
 
Haven't gifted but one time to our son when he had a home his future wife had a home, he bought a new home that fit both of them. Money trying to keep up with payments he could handled but we asked if we could lessen the burden.

So, we did gift 100K for that new home since he had one, he needed to sell when he bought the second home.

He has always wanted to pay his own way and never once has asked for money. He paid his own way through college we never helped.
 
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He has always wanted to pay his own way and never once has asked for money.
I never borrowed from my parents (not a dime) partly because I wanted to make it on my own (pride) and partly because they didn't have a lot of extra cash until very late in life. By then I had my first million or two.
 
We gift to 529 plans and custodial brokerage accounts for our grandkids. We own the townhomes each of the boys live in with their families, rent free. They’ll inherit those when we pass, along with most of what’s left.
We also give $20-25k to each of our two boys at Christmas time.
With the TCJA possibly expiring after 2025, we may set up generation skipping trusts for our grandkids. We meet with our estate attorney next week via Zoom to discuss it.
 
I am inquiring, please correct my understanding -

At present the Estate Tax up to 40% is levied on children on inherited Estates beyond $11.2 million when parents pass away for singles & $22.4 million for married couples.
(Although the surviving parent will be single at the time of his/her passing)

Probably in 2026 the Estate Tax exemption will revert back to $5 million each or $10 million as a married couple.

Generation Skipping Trust which is a irrevocable Trust will duplicate the above exemptions, the assets going to grandchildren instead to one's children.

In sum, beyond $ 20 millions, the government will get the 40% of remaining assets.

??
 
Yes, except the exemption levels will be adjusted for inflation.
 
The $5M is going to be $7M after adjusted for inflation:

"The Tax Cuts and Jobs Act of 2017 provided major changes to the Internal Revenue Code, specifically doubling the federal estate, gift, and generation-skipping transfer (GST) tax exemption (collectively, the Exemption) from $5,490,000 in 2017 to $11,180,000 in 2018. Since then, we have seen the exemption rise to $13,610,000 in 2024 due to inflation. However, on January 1, 2026, the exemption is scheduled to automatically reset (or sunset) to $5,000,000, indexed to inflation (approximately $7,000,000), unless Congress acts prior to then."
 
I used to gift cash regularly to both my sons until their wives informed me that I need to quit trying to buy their love. Now we gift $100 to everyone on birthdays and Christmas. No more. I hope that makes them all happier.
 
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