Gifting to Children

Have you thought of making a gift to your children? There are many reasons parents make gift, and before doing so here are a few tips to consider.

First thing to be aware of: there is an annual gift amount that is exempt from filing a gift tax return. For 2022 this amount is $16,000 per person. For example, an individual parent can gift up to $16,000 per year to a child, while two parents can gift up to $32,000 to their child.

If you make a gift above the exemption amount, you will need to file a gift tax return, which in turn will reduce your lifetime gift exemption for tax purposes.

Let’s talk about the different accounts you can use to make gifts.

Minor Children

What if your children are under 18?

You can open a 529 College Savings account and gift up to $16,000 per year, or you can consider lumping five years’ worth of gifts into one year.

As long as your child has earned income, you can help fund a Roth IRA, which has the benefits of tax-free growth and are great for a long-time horizon.

You can also fund a UTMA brokerage account for minors. These accounts allow you to help fund an investment account for your minor.

Adult Children

For adult children, here are a few strategies to consider.

If your net worth is potentially subject to Federal and State Estate Tax, consider making annual gifts today to reduce your taxable estate.

By making annual gifts, your children may be able to benefit as their current expenses, such as daycare, may cause added stress to their finances.

Gifting Appreciated Assets

Instead of gifting cash, you can reduce or avoid paying capital gains altogether by gifting assets with gains, such as appreciated stock.

If your child is in college, there can be a great opportunity for you to potentially avoid capital gains tax while funding their tuition bill through building the right tax and gifting plan each year.

Boulay Can Help

Gifting to children can be a complex undertaking, however we at Boulay will help you develop a game plan to maximize the value of your gifts and achieve your goals. Contact a Boulay wealth management advisor today.