Main page content

3 Tax-Smart Gifting Strategies

This is the time of year when many people are gift money to their children or grandchildren and making donations to charitable organizations. 

As advisors, we’re working to help our clients determine the best approach to giving this year. 

Many people don’t realize there are many ways to gift money beyond simply cutting a check.  

Here’s a look at three tax-smart gifting strategies:

1. Gift appreciated shares instead of cash

For some investors, it’s advantageous to gift securities instead of cash. By gifting shares that have appreciated in value, you’re not only supporting the people or causes that matter to you, but also lowering your tax bill. 

Talk to your advisor about which shares are best to pass along; it may not be your best-performing position. 

2. Donate from your RMD

If you’re over 70½, you can transfer up to $100,000 of your required minimum distribution (RMD) from your IRA to a qualified charity. 

While ordinary RMDs are treated as taxable income, qualified charitable distributions (QCD) generally aren’t taxable. 

3. Contribute to a 529 plan

Did you know that 529 plans can also be used for estate planning and annual gifting?

You can make up to five years' worth of contributions to a 529 plan in a single year (up to $75,000 per beneficiary) without incurring federal gift taxes, as long as you don’t give any more to the plan for the next five years. 

Talk with your advisor about which approach is best for you.