Episode Transcript
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Speaker 1 (00:00):
And our telephone lines are open for you right now
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Number six oh eight three two one thirteen ten.
Speaker 1 (00:15):
Delpha up for Class Financial their office right here in
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Speaker 2 (00:35):
That's Closs A L aas Financial dot com.
Speaker 1 (00:38):
Great website to learn more about Class Financial, listen back
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Speaker 3 (00:51):
This morning our CJ. Closs and Eric Schwartz.
Speaker 2 (00:54):
CJ. How you doing this morning?
Speaker 4 (00:56):
I'm doing great.
Speaker 2 (00:57):
Good morning Sean, Good morning, CJ. Eric Hof you Ben,
I've been doing great.
Speaker 5 (01:02):
I'm glad to see some temperatures above zero.
Speaker 1 (01:04):
Yes, yeah, yeah, it's always nice to have to have
a solid whole number, a positive, a plus number firs
for sure.
Speaker 3 (01:13):
Speaking of positives and really good good things.
Speaker 1 (01:18):
I know this time a year, a lot of folks
start thinking about gift giving and other things, and we're
to talk about gift giving and when it comes to
adult children and other areas of that. This Morning with
Eric and CJ here on Money in Motion thirteen to
ten WIVA. Before we get rolling though on this week's conversation,
another great feature of the show is the Closs Quiz
Question of the week, your chance to win a fantastic
(01:39):
prize this week, no exception, our friends from Class Financial
provide a twenty five dollars gift card to Cheesecake Factory
and we'll let you know how you can win that
before the end of the program. A little tip they'll
listen closer to the show because most of the time
the question and answer come up during the show. And
before we get rolling on this week's topic and conversation,
let's actually take a look back at last week's program
(02:00):
at the Class Quiz question, the week question and answer
from last week's show as well.
Speaker 5 (02:05):
Yeah, so, as always, thank you to everyone for listening.
And our winner last week was Alex from Madison, So congratulations.
Alex got the question correct, which was what is the
new standard deduction for single taxpayers in twenty twenty five?
The choices were ten thousand dollars or fifteen thousand and
the answer is that in twenty twenty five, for single
(02:26):
taxpayers and married individuals filing separately, the standard deduction rises
to fifteen thousand dollars.
Speaker 2 (02:33):
Fantastic and it was a great show last week. And
I know a lot of folks have questions as we get.
Speaker 1 (02:38):
Prepared for this year, and there's always great information up
at classfinancial dot com. That's Class klaasfinancial dot com. So
as we talk about obviously here on the program saving
for Retirement, another area that comes up is adult children,
specifically helping them out. What are some things that we
need to be aware of when it comes to gifting
object option CJ.
Speaker 4 (03:00):
Yeah, So we're excited about this topic today because often
inside of our meetings there's confusion between the difference of
a gift to a child or individual relative or in
comparison to a gift to a charity or a charitable donation.
And so we're going to talk about gifting today a
little bit. And I guess first, let's define what is
considered a gift. The IRS considers any transfer to an individual,
(03:25):
either directly or indirectly, where full consideration measured in money
or money's worth is not received in return. The general
rule is that any gift is a taxable gift. Now
I'll just pause right there. A lot of times that
final sentence, the general rule is that any gift is
a taxable gift freaks people out because they.
Speaker 1 (03:48):
Go, whoa, whoa, whoa, whoa, whoa whoa.
Speaker 4 (03:49):
What do you mean by every gift is a taxable gift? Well,
there's all these exceptions that make it so that that
final statement rarely is actually impacting individuals, and so kind
of stick with us here. So every year, there's something
called a gift tax Exclusion amount for and this is
(04:10):
for federal gift tax purposes, and that amount is currently
nineteen thousand dollars in twenty twenty five. That means that
you can gift nineteen thousand dollars per person to as
many people as you want with no federal gift tax consequences. Now,
if you split gifts with your spouse, that total is
thirty eight thousand dollars per person. So think of this
(04:31):
in terms of children, right, Hey, I'm going to give
money to my children, and I don't want to pay
more taxes and I don't want them to pay any
taxes on this cash that I have sitting in my
savings account. How do I give it to them? Well,
you could just use the gift tax exclusion amount of
nineteen thousand dollars per person, or if you're you know,
if you're married, you could do nineteen times nineteen thirty
eight thousand to each child. I mean, it's a lot
(04:53):
of money, as you can imagine. And here's the key.
If you stay under that gift tax limited amount for
each gift to each of those children, you know, you
could give away a lot of money without any tax repercussions.
And the ones those gifts are made, that money is
removed from your taxable estate. And here's the other kind
(05:13):
of cool thing. In twenty twenty five, the max you
can give without any federal estate tax is thirteen million,
nine hundred and ninety thousand dollars to as many individual
or I'm sorry to you know, beneficiaries. Let's say this
is during or after life or times two for a
(05:34):
married couple, So twenty seven million, nine hundred and eighty dollars,
and again you would pay no federal estate tax or
gift tax. Now here's the key that nineteen thousand dollars
I was talking about earlier, that those gifts do not
apply towards reducing what is called your lifetime exemption amount.
So lifetime exemption is that call it. I'm just going
(05:55):
to round up, call it fourteen million dollars. So during
or after life you can give up to fourteen million
dollars with no gift tax or federal estate tax. However,
those nineteen thousand dollars gifts all throughout your life don't count.
It would only be the amounts that go over that.
So imagine that I want to instead of giving nineteen
thousand dollars to say one of my children, I want
(06:18):
to give them one hundred thousand dollars. Well, the way
that would work is I would take one hundred thousand
dollars minus nineteen thousand that doesn't count towards the towards
the lifetime exemption amount. I would then take that number,
so call it, what is that eighty one thousand dollars,
and I would reduce that from my fourteen million dollars
that I can give during my life, actually during or
(06:41):
after my life. So you see my point. That final
sentence that I read, which is the general rules that
any gift is a taxable gift, you kind of pause
and you go, really because it sounds to me like
there's a lot of ways for me to give money
away without having to worry much about it. Let me
add one other factor here. That nineteen thousand dollars for
every individual from you to any individual you want to
(07:04):
per year without reducing your lifetime exemption amount. That is
a really critical number to remember because if you stay
under that number, you don't have to fill out what's
called a Form seven oh nine. Think of that Form
seven oh nine. It's called a gift tax return as
the certificate. Right, So let's say I can give away
fourteen million dollars during or after life. Well, if I
(07:25):
go over that nineteen thousand, I have to start filling
out that certificate aka Form seven oh nine that keeps
track of how much I'm reducing my lifetime exemption amount.
Now final thought here on this kind of little section
is that at the end of twenty twenty five, the
federal estate and gift tax exemption amount is scheduled to sunset.
(07:46):
Assuming Congress and the President take no action, this gift
tax exemption could decrease to approximately seven million dollars per person.
So it's about fourteen million dollars it could decrease to
seven Now, I'll be frank with you, we have no
idea whether or not this will change. There's people guessing
that it will change under on the Trump administration, but
(08:06):
we we really still do not know. So just be aware.
Lifetime amount you can give away is fourteen million. Now
it could be down to seven million as early as
twenty twenty six.
Speaker 2 (08:17):
Talk this morning with CJ.
Speaker 1 (08:18):
Closs and Eric Schwartz, our retirement planning professionals from Class Financial.
Their website Class financial dot com. That's Coss Klaas Financial
dot com and they're telephone number six So eight four
four two five six three seven that's four four.
Speaker 2 (08:31):
Two fifty six thirty seven.
Speaker 1 (08:32):
Don't forget no charge for that initial get to know
you appoyment at Class Financial.
Speaker 2 (08:35):
AIG will be complementary to you.
Speaker 3 (08:37):
What are some of the things then, CJ that we
do know.
Speaker 4 (08:41):
Yeah, so just just some things for people to be
aware of. Here there are again there's no taxes on
the giver and again usually no taxes paid by the recipient.
Now I say usually, and people hate that word, they
would be definitive. Well, listen, if you if you gift stock,
highly appreciated stock to your child that you have not
paid the capital gains tax on. Well, if you gift
(09:05):
them that, you're gifting them not only the value of
the stock, but also the basis of the stock. Aka,
you didn't pay tax, they're going to have to pay tax.
So if you give them that stock and then they
go and sell it, they're gonna pay the capital gains
tax on it. But assuming you're giving cash of some sort,
so money you've already paid tax on. So not retirement accounts, right,
because you can't gift money out of a retirement account
(09:26):
that's pre tax. But let's say this is money in
a checking savings stock account that you've already paid tax on.
Generally speaking, you as the giver will pay no tax
and the recipient will pay no tax. Now here's a key,
one of the biggest questions. We get this is great, well,
then I will just I'll give nineteen thousand to each
of my children and then I'll deduct that on my taxes.
(09:47):
No no, no, no, no, no no no. We didn't
say you'd get a deduction. They are not charities. So
that's where the kind of the line in the sand
comes in here. The good news is you don't have
to pay any tax. They don't pay any tax upon
rescups even get assuming it's cash. But it does not.
It's not a gift to a charity, and therefore you
cannot deduct that gift to your children. I mean, that
(10:09):
would be great, and then if we could just give
money away to our children and take it off our
own income for the year, But that is not the
way that it works. And so I already mentioned as
long as you are aware of that nineteen thousand dollars
limit and you try to avoid going over it to
any one individual in a year, then you don't have
to fill out that Form seven o nine. And the
beauty there is then you preserve your lifetime exemption amount.
(10:33):
Now why would you want to do that, Well, because
when you die, everything you own, including any life insurance
proceeds goes towards that lifetime exemption amount. So there is
kind of this incentive to try to preserve that if
you don't need to use it. Now, I'll admit to you,
for ultra wealthy family families, they're actually not trying to
(10:54):
preserve that. They're actually trying to do very large gifts
to use up their lifetime exemption amount and then get
large portions of their estate out to an irrevocable trust.
But more to come on that later in our show. Today.
Speaker 2 (11:05):
We'll get to that and so much more as we
continue our conversation with CJ. Closs and Eric Schwartz.
Speaker 1 (11:09):
Of course, they are our retirement finding professionals from Class
Financial the website Coss financial dot com. That's Coss k
l A A S Financial dot com. And they're telephone
number six so eight four four two five six three seven.
So Eric, let's talk then about if you give money
to someone, do I have to pay a gift tax?
Speaker 5 (11:29):
That's a great question, Sean. In most cases, as CJ
was saying, there is no gift tax to be paid. However,
if there is, you know, we just talked about a
bunch of the ways of UH. Basically excluding gifts from
your taxable income. But if there is a tax to
be paid, the donor is generally responsible for paying that tax.
(11:50):
There are some special arrangements where where the receiver can
can pay the tax, but in most cases it's going
to be the donor. But let's I want to dig
in here a little bit more on some of the
exceptions and why we say, you know, generally there's not
going to be any gift techs do on this. So
the one that the first one and the one we
talk about most often with our clients and CJ is
(12:12):
just talking about here, is the any gifts that don't
exceed that nineteen thousand dollars per individual per year. Those
are that's your freebie, right, That's not even going to
be considered when it comes to your your lifetime credit
or anything. So that nineteen thousand number is generally what
people are focusing on when they're when they're giving money
(12:33):
to those non charitable organizations, regardless of how the parents
feel about the kids. Another exclusion is going to be
a tuition or any medical expenses that you pay for
someone else. So I'm going to discuss more about this
in a moment. In terms of the rules around that.
But the you know, tuition support, medical expenses that you
(12:55):
pay off, those are not subject. Those are those are
not subject to the gift texts.
Speaker 2 (13:00):
Fantastic, Oh go ahead, No, I'm.
Speaker 5 (13:03):
From gifts to your spouse. So the irs allows you
to gift as much as you would like to your spouse,
assuming that they are US citizen. And finally, gifts to
a political organization for its own use, those are are
automatic subject any gift tax rules.
Speaker 2 (13:22):
Really important.
Speaker 1 (13:23):
It's interesting that they that the politicians would leave that,
leave that little loophole there for you.
Speaker 2 (13:27):
It really is ironic.
Speaker 3 (13:29):
I'm talking this morning with CJ.
Speaker 1 (13:31):
Closs and Eric Schwartz, our retirement planning professionals from Class
Financial website Class.
Speaker 2 (13:35):
Financial dot com.
Speaker 1 (13:36):
That's Coss k l a as Financial dot com and
their telephone number six so eight four four two five
six three seven. We'll continue our conversation with CJ and
Eric and take your call next as Money in Motion
with Class Financial continues right here on thirteen ten doll
will u ib A getting charitable this week with our
retirement planning professionals from Class Financial, Eric Schwartz and CJ.
Speaker 3 (13:55):
Closs the website you can learn more about Class.
Speaker 2 (13:57):
Financial, the team, the separate divisions.
Speaker 1 (13:59):
Also and sign up for the weekly market Ball's newsletter
and listen back to this in previous shows podcasts.
Speaker 2 (14:05):
All of that available to you at class financial dot com.
Speaker 1 (14:07):
That's colss k l a as Financial dot com at
the teleph number six so eight four four two five
six three seven. No charge for that initial get to
know you appoyment dech loss financial. It will be complimentary
to you. So, Eric, just before the break, we started
talking about some of the areas where there would not
be a gift text. What are some of the other
benefits then of giving gifts to families or other folks?
Speaker 4 (14:33):
Yeah, I think.
Speaker 5 (14:34):
I think in general it's nice to give a gift
and actually see the recipient enjoy it, rather than waiting
until you're no longer here. So we see a lot
of people once they've kind of gotten to a point
where they feel comfortable that they have enough for themselves,
they will begin gifting to their kids and and beyond that.
If you're giving to children, for example, they probably have
(14:56):
a greater need for that financial support when they're in
their thirty or their forties compared to when most folks
pass away. So let's think about this. If people live
into their seventies or maybe their eighties, their children are
likely closing in on retirement when they pass away, and
they've already had to do, you know, a lot of
(15:17):
the what i'll call it financial hard work at by
that point. So are they going to be grateful for
the gift, obviously yes, But will it be as impactful
as it would have been when they were younger. Probably not.
And you know, so, I think those are just a
couple of things we think about when we're thinking about gifting,
specifically to family. And regardless of who you decide to
(15:41):
give to or when you decide to start gifting, it's
really important to create a gifting strategy. So, like I said,
once you have enough resources to take care of your
needs during your lifetime, giving assets to your children or
to charities, which we haven't talked too much about yet,
it could be helpful from the state planning perspective, and
(16:01):
it can have a really really large impact on the
quality of life of your errors your favorite causes, and
for yourself, a strategy for gifting can help you minimize
your future state taxes and really really want to drive
home the fact that if you're giving to family, giving
(16:21):
to them earlier on generally is a lot more impactful
than waiting until later. But earlier we were talking about
the gift tax exclusion for education and medical expenses, and
I mentioned that we were going to dig into that
a little bit more because it's a little bit more
complicated than the nineteen thousand dollars rule. So one of
(16:44):
the exceptions to the nineteen thousand dollars annual gifting limit
is that you can give an limited amount to your
children for tuition or medical expenses. So education and retraining
that can be an excellent way to help your kids
be more self sufficient, and you know it has the
potential to make them more employable or maybe even help
them earn more in their current job. But two really
(17:07):
important things to understand around the education and medical expense
exception was that the money it must be paid directly
to the educational institution or the medical provider. It cannot
go to the kids first. At that point you're going
to be subject to that nineteen thousand dollars rule again.
(17:28):
And then helping to pay off student loans would not
count as an exception unless you were a co signer
on the loan. That's despite the fact that it originally
came from tuition obviously, but you must have been a
co signer on that loan in order to not have
it count as a taxable gift. And the last thing
(17:48):
I want to talk about in this section here is
another great way to benefit your errors is by giving
them money that they can then contribute to their retire accounts.
Speaker 4 (18:00):
Okay, so.
Speaker 5 (18:02):
If you think about an individual retirement account, the annual
contribution limit to that is currently seven thousand dollars a
year for those who are under fifty. So you could
give a gift to the kids with the expectation that
it is then used to say for their future.
Speaker 1 (18:18):
It's really really good to really good to options and
really really good opportunities for folks, and of course something
worth exploring. You can learn more online Clasfinancial dot com
delvium number six so eight four four two five six
three seven so CJ. Earlier, you kind of alluded to
trust that we were going to get into them a
little bit more. Let's talk about using trusts to make gifts.
Speaker 2 (18:38):
What do we need to know there?
Speaker 4 (18:40):
Yeah, so we're going to talk about those trusts. I
do want to make a quick comment on what Eric
was just mentioning there on retirement accounts, because, as Eric
can attest, every once in a while we'll have somebody say, hey,
I heard what you saw said on the air, and
I want to make a contribution or set up a
roth IRA for my adult daughter and put seven thousand
dollars into it, and we go, hmm, you slightly misunderstood
(19:03):
what we were saying there. So just to clarify, you
can give money to your children. You can't be making
contributions on their healf without their awareness. Now give a
minor child. That's a little bit different. There's these things
called custodial retirement accounts or custodial roth I raise. I
was just helping a client set up one yesterday on Fidelity.
But generally speaking, what Eric is saying here is like
(19:23):
you can give it with the expectation of a going
into a retirement account, which is again it can be
a huge blessing to your children when they have cash
to live off of, so that those earnings that they
receive from their employer can go into a retirement account. Well,
that being said, yes, so your question about trust and
what I alluded to earlier, so a state planning just
(19:46):
it's not just about preparing for the future, it's also
about taking strategic steps during your lifetime to benefit your
loved ones. Using specialized trust can help you pass on
wealth efficiently, reduce taxes, and preserve the value of your estate.
So here's a breakdown of three key points as it
relates to trust and kind of gifting and moving money
(20:07):
to the next generation while being tax efficient. Item number
one would be an irrevocable trust. This can shift growth
to the next generation. So here would be a concept.
Let's say that I own I've been blessed throughout life,
I built maybe a small business. That small business has grown,
I don't know, I own a good portion of it,
(20:28):
and suddenly I'm left in a position where I go, goodness, gracious,
my stock when I die is gonna put me over
some of these limitations on lifetime exemption amounts. And now
again these are large amounts, right, but often people say,
what the heck do I do? Because I've got these
lifetime exemption amounts, I can only gift so much to
(20:49):
my kids without using up my lifetime exemption. So how
does this work? C how could I and not to
mention I've still got the business. This this thing is
still growing. It could be fifty eighty one hundred million
dollars by the time I die, and then my family
just has to get blown up with taxes. Well, no
one thing you can do if you're operating agreement allows
(21:09):
for it, which you do have to start getting pretty
specific here on working with lawyers and accountants. But is
you can actually gift some of that stock into an
irrevocable trust. Once it goes into the vocabal trust, two
things happen. You are using up some of your lifetime
exemption amount that you know, fourteen million dollars we talked
about to put money into that trust. But let's say
I put ten million dollars hypothetically of that highly appreciated
(21:31):
you know stock into that irrevocable trust. Well, all the
future appreciation on that is now outside of the estate.
It can still benefit my children, so it can still
say the beneficiaries of this stock are my children. But
the beauty is I have used some of my lifetime exemption.
I've gotten that money into a trust, and then all
the future appreciation of that stock is outside of the
(21:53):
estate and it can't impact my lifetime exemption amount. Another
concept might be, so stick with that idea of the
highly appreciated stock. Well, what if I my corporate governance
doesn't allow for that, or I just don't want to
put that much money into an irrevocable trust, or I
should say that much stock. What are other options? Well,
another option would be doing what's called an irrevocable life
(22:16):
insurance trust known as an islet. Because we know our
industry loves our acronyms, so islets. It's this idea of saying, Hey,
I'm going to keep all that stock inside of my estate,
but I don't want to my kids get blown up
on taxes when I die. What do I do? Well,
you could buy a life insurance policy inside of an
irrevocable life insurance trust if you do it all appropriately,
(22:39):
and by the way, you really need to work with
a lawyer, accountant advisor on this is not something to
try to do on your own and my humble opinion,
but if you do it all appropriately, that large life
insurance policy when you die can come swooping into the
estate without counting towards your federal estate tax exemption amount.
So it comes swoop in And why does it come
(23:01):
swooping in to pay all the taxes, right, so it
pays the taxes without increasing your taxes. So ear Vocal
Life Insurance trust can be a great way to pay
final expenses, pay pay any taxes that would be due
upon the estate without kind of forcing the beneficiaries to
have to sell a bunch of your stock or to
(23:21):
have to, you know, sell a bunch of land. Think
of a farmer with a lot of land. So these
can this can be another great estate planning tool. And
then finally there's these concepts of grantor retained annuity trust
known as grats. And I will just warn everybody, as
much as I love talking about this, just a word
to the wise, none of these strategies we're talking about
(23:42):
should be something you jump on Google and say, I'm
gonna I'm gonna do this tomorrow. Please don't. These are
advanced financial planning strategies that often require you know, expert
legal advice, good accounting advice, good financial advice, advisor feedback.
So with that being said, though, the concept of a
grant or retained annuity trust is that they're ideal for
(24:05):
gifting assets that are likely to appreciate significantly in value.
So a lot like the irrevocal trust. So this could
be again privately health shares of a company, you know,
hedge funds, private equity stocks, real estate interests, and closely
held business and you transfer assets to the grat and
retain the rights to receive an annuity aka income for
(24:26):
a set period. When the trust term ends, any remaining
assets pass to your beneficiaries free of federal gift tax.
This allows you to lock in today's asset value while
giving your loved ones the benefit of future growth, while
also getting some income along the way. So think of
that original irrevocable trust concept I talked about at the beginning,
(24:49):
that once it's out, it's out, you can't get it back.
Whereas this granted retained annuity trust, you still can't get
the money back, but you can get an income stream
off of it, which can be nice because lest you
put the money in you use part of your lifetime exemption.
That money goes to your children a state tax free
later on. But along the way you're able to get
an income stream to you know, offset any any income
(25:12):
needs you have in retirement. So very advanced estate planning techniques,
this is actually just the tip of the Iceberg of
various estate planning advanced estate planning techniques, but these are
a few that we see commonly, commonly used.
Speaker 2 (25:27):
Really fascinating stuff. This week, as we talked with CJ.
Speaker 1 (25:29):
Closs and Eric Schwartz, oh were retirement finding professionals from
Class Financial, the website COSS Financial dot com. That's Coss
k l a A S Financial dot com and their
telephone number four four two, five, six three seven. More
of Money in Motion is next right here thirteen ten
WI b A and the website Colss Financial dot com.
That's k l a A S Financial dot Com. They're
(25:52):
telephone numbers six so eight four four two, five, six
three seven. Coming up with later this segment will do
our class quiz quesch Leak, So you want to hold
on to that number for that as well. Talking this
week about charitable giving and Eric, what about incorporating charitable
giving into our estate planning.
Speaker 5 (26:09):
Yeah, we've been talking a lot about giving gifts to
family members or other individuals in your life, but we
wanted to touch on charitable giving here a little bit
before the end of the show. And when it comes
to charitable giving, there are more options than just writing
a check to the charity, and I know that's how
most folks will do it, but there are some more
(26:31):
we'll say advantageous options as well. So whether you're looking
to give back to your community or just support a
cause that you really love, there were some really impactful
ways to do that. We're going to look at four
of them here briefly. The first one is the simplest. Okay,
so it's just an outright charitable gift. This is, you know,
sending a check to the Salvation Army or whichever organization
(26:55):
is important to you. You're giving cash directly to the charity,
and provided that you are able to itemize your taxes,
you can often get an income tax deduction for this,
and you know, in the long run it can also
reduce your estate taxes, and you know, really simple win
(27:17):
win for the charity and for the individual. But the
second one here is is actually when we're seeing a
lot more since since the Tax Cuts and Jobs Act
raised these standard deductions so high and made it less
likely that folks will itemize their taxes. And that's a
donor advised fund or a daft CJ says, we love
(27:38):
the acronyms, but think of this as like your personal
charitable giving account. So when you contribute dollars to this
fund that you set up at you know, a brokerage
house or wherever it is, you get an immediate tax benefit.
Speaker 4 (27:53):
Okay.
Speaker 5 (27:54):
So let's say you put in a big chunk of money.
Let's say you put in twenty thousand dollars. You get
an immediate twenty thousand dollars today deduction. But you don't
have to give all of that money right away to
the charitable organizations. Okay, it gives you time to decide.
It can be you know, years before you actually give
the money out of the out of the account. Now,
(28:17):
it's important to remember, even though you don't have to
give all the dollars to the charitable organizations immediately, your
contribution is irrevocable.
Speaker 4 (28:24):
Okay.
Speaker 5 (28:25):
The IRS gave you a deduction, they're not going to
allow you to take it out later on. But these
funds can remain in the account, they can be invested,
they can grow tax free, and you can you can
have some flexibility and time in making your charitable giving decisions.
And the really really important part about this is it
(28:46):
allows you to what we call bunch your gifts in
one year, so that you can get enough to deduct
to use the itemized deductions and actually be able to
deduct the contributions, and then you know, in future years
you can give the dollars away having gotten that large
tax benefit right up front. The last two that I
(29:09):
want to talk about here are actually forms of irrevocable trusts,
which CJ was just just talking about in our last
section here. The first one is a charitable lead trust.
So this arrangement allows a charity to benefit first from
the dollars and basically any income generated by the assets
(29:29):
in the trust goes to a charity for a set
period of time. After that, the remaining assets are passed
to your beneficiaries, all while potentially lowering your estate tax burden.
So it's a great way to support an organization that's
important to you, but also leave a legacy for your heirs.
And then the last one here is a charitable remainder trust.
(29:51):
So this is the reverse of the charitable lead trust. Okay,
so in this case, your beneficiaries are receiving income from
the trust for a set period of time time and
then any assets left over go to the charity at
the end of the term. So you'll receive a charitable
deduction upfront, you'll reduce your state taxes, and this approach
allows you to support a cause while ensuring that your
(30:14):
loved ones are still cared for for that set period
of time. Now, I know all of these strategies seem
like I don't know. People may to hear them and say, gosh,
that just seems so far away from me. I'm not
going to think about that right now. But thinking about
these strategies earlier, it gives you more control and flexibility
in managing your legacy. So whether you know you're trying
(30:35):
to protect your state, maximize your growth, ensure liquidity, all
of these are going to be more impactful if you
actually think about them strategically and plan for them ahead
of time, and make sure you speak to a professional
to see how you can implement these two best benefit
you a lot of.
Speaker 2 (30:55):
Great tools and a lot of great options.
Speaker 1 (30:58):
Just got to make sure that you're putting these things
in place and putting that plan together. If you've got questions,
don't forget great website cossfinancial dot com great resource you
can learn more about Class financial folks. At class Financial
you can learn about their separate divisions as well, that's
all at Cossfinancial dot com. That's Coss Klaasfinancial dot com
and their telephone number six oh eight four four two five,
(31:19):
six three seven. And you want to hold on to
the telephone number. Now it's time for the Class Quiz
Question the Week.
Speaker 2 (31:23):
It works like this.
Speaker 1 (31:24):
In just a moment, I'll ask you the Class Quiz
Question the Week. You then have thirty minutes from the
today's program to call the Class Financial Office right here
in Madison at six oh eight four four two five
six three seven. If you are the first caller with
correct answer, you'll win this week's prize, which is a
twenty five dollars gift card to the cheesecake Factory. This
week's Class Quiz question week is this what amount can
(31:45):
you gift per person in twenty twenty five with no
federal gift tax consequences? Is it fifteen thousand dollars or
nineteen thousand dollars? Telephone number six oh eight four four
two five six three seven. First call correct answer, we'll
win that twenty five dollars gift card too the cheesecake factory.
Don't forget as well, that's Class Financials Office right here
(32:05):
in Madison again the number six O eight four four
two five six three seven CJ Eric. Always great chatting
with both of you.
Speaker 2 (32:12):
Guys.
Speaker 4 (32:12):
Have a great day, thanks Sean, Thanks Sean, take care guys.
Speaker 1 (32:15):
Doctor Marty Greer joins us next here on thirteen ten
WIV eight
And our telephone lines are open for you right now
at six oh eight three two one thirteen ten. That's
six oh eight three two one thirteen ten. If you
have questions for our retirement planning professionals love to have
you join us this week again station.
Speaker 2 (00:13):
Number six oh eight three two one thirteen ten.
Speaker 1 (00:15):
Delpha up for Class Financial their office right here in
Madison six oh eight four four two five six three seven.
Don't forget no charge for that initial get to know
your appointment at Class Financial. It will be complimentary to
you again their number six oh eight four four two
five six three seven. Also head on over to the
website class financial dot com if you haven't been there
recently checked them out.
Speaker 2 (00:35):
That's Closs A L aas Financial dot com.
Speaker 1 (00:38):
Great website to learn more about Class Financial, listen back
to this in previous shows podcast. Learn more about the
separate divisions at Clause the team, as well as sign
up for the weekly market Paul's newsletter that all available
to you at class financial dot com and join us.
Speaker 3 (00:51):
This morning our CJ. Closs and Eric Schwartz.
Speaker 2 (00:54):
CJ. How you doing this morning?
Speaker 4 (00:56):
I'm doing great.
Speaker 2 (00:57):
Good morning Sean, Good morning, CJ. Eric Hof you Ben,
I've been doing great.
Speaker 5 (01:02):
I'm glad to see some temperatures above zero.
Speaker 1 (01:04):
Yes, yeah, yeah, it's always nice to have to have
a solid whole number, a positive, a plus number firs
for sure.
Speaker 3 (01:13):
Speaking of positives and really good good things.
Speaker 1 (01:18):
I know this time a year, a lot of folks
start thinking about gift giving and other things, and we're
to talk about gift giving and when it comes to
adult children and other areas of that. This Morning with
Eric and CJ here on Money in Motion thirteen to
ten WIVA. Before we get rolling though on this week's conversation,
another great feature of the show is the Closs Quiz
Question of the week, your chance to win a fantastic
(01:39):
prize this week, no exception, our friends from Class Financial
provide a twenty five dollars gift card to Cheesecake Factory
and we'll let you know how you can win that
before the end of the program. A little tip they'll
listen closer to the show because most of the time
the question and answer come up during the show. And
before we get rolling on this week's topic and conversation,
let's actually take a look back at last week's program
(02:00):
at the Class Quiz question, the week question and answer
from last week's show as well.
Speaker 5 (02:05):
Yeah, so, as always, thank you to everyone for listening.
And our winner last week was Alex from Madison, So congratulations.
Alex got the question correct, which was what is the
new standard deduction for single taxpayers in twenty twenty five?
The choices were ten thousand dollars or fifteen thousand and
the answer is that in twenty twenty five, for single
(02:26):
taxpayers and married individuals filing separately, the standard deduction rises
to fifteen thousand dollars.
Speaker 2 (02:33):
Fantastic and it was a great show last week. And
I know a lot of folks have questions as we get.
Speaker 1 (02:38):
Prepared for this year, and there's always great information up
at classfinancial dot com. That's Class klaasfinancial dot com. So
as we talk about obviously here on the program saving
for Retirement, another area that comes up is adult children,
specifically helping them out. What are some things that we
need to be aware of when it comes to gifting
object option CJ.
Speaker 4 (03:00):
Yeah, So we're excited about this topic today because often
inside of our meetings there's confusion between the difference of
a gift to a child or individual relative or in
comparison to a gift to a charity or a charitable donation.
And so we're going to talk about gifting today a
little bit. And I guess first, let's define what is
considered a gift. The IRS considers any transfer to an individual,
(03:25):
either directly or indirectly, where full consideration measured in money
or money's worth is not received in return. The general
rule is that any gift is a taxable gift. Now
I'll just pause right there. A lot of times that
final sentence, the general rule is that any gift is
a taxable gift freaks people out because they.
Speaker 1 (03:48):
Go, whoa, whoa, whoa, whoa, whoa whoa.
Speaker 4 (03:49):
What do you mean by every gift is a taxable gift? Well,
there's all these exceptions that make it so that that
final statement rarely is actually impacting individuals, and so kind
of stick with us here. So every year, there's something
called a gift tax Exclusion amount for and this is
(04:10):
for federal gift tax purposes, and that amount is currently
nineteen thousand dollars in twenty twenty five. That means that
you can gift nineteen thousand dollars per person to as
many people as you want with no federal gift tax consequences. Now,
if you split gifts with your spouse, that total is
thirty eight thousand dollars per person. So think of this
(04:31):
in terms of children, right, Hey, I'm going to give
money to my children, and I don't want to pay
more taxes and I don't want them to pay any
taxes on this cash that I have sitting in my
savings account. How do I give it to them? Well,
you could just use the gift tax exclusion amount of
nineteen thousand dollars per person, or if you're you know,
if you're married, you could do nineteen times nineteen thirty
eight thousand to each child. I mean, it's a lot
(04:53):
of money, as you can imagine. And here's the key.
If you stay under that gift tax limited amount for
each gift to each of those children, you know, you
could give away a lot of money without any tax repercussions.
And the ones those gifts are made, that money is
removed from your taxable estate. And here's the other kind
(05:13):
of cool thing. In twenty twenty five, the max you
can give without any federal estate tax is thirteen million,
nine hundred and ninety thousand dollars to as many individual
or I'm sorry to you know, beneficiaries. Let's say this
is during or after life or times two for a
(05:34):
married couple, So twenty seven million, nine hundred and eighty dollars,
and again you would pay no federal estate tax or
gift tax. Now here's the key that nineteen thousand dollars
I was talking about earlier, that those gifts do not
apply towards reducing what is called your lifetime exemption amount.
So lifetime exemption is that call it. I'm just going
(05:55):
to round up, call it fourteen million dollars. So during
or after life you can give up to fourteen million
dollars with no gift tax or federal estate tax. However,
those nineteen thousand dollars gifts all throughout your life don't count.
It would only be the amounts that go over that.
So imagine that I want to instead of giving nineteen
thousand dollars to say one of my children, I want
(06:18):
to give them one hundred thousand dollars. Well, the way
that would work is I would take one hundred thousand
dollars minus nineteen thousand that doesn't count towards the towards
the lifetime exemption amount. I would then take that number,
so call it, what is that eighty one thousand dollars,
and I would reduce that from my fourteen million dollars
that I can give during my life, actually during or
(06:41):
after my life. So you see my point. That final
sentence that I read, which is the general rules that
any gift is a taxable gift, you kind of pause
and you go, really because it sounds to me like
there's a lot of ways for me to give money
away without having to worry much about it. Let me
add one other factor here. That nineteen thousand dollars for
every individual from you to any individual you want to
(07:04):
per year without reducing your lifetime exemption amount. That is
a really critical number to remember because if you stay
under that number, you don't have to fill out what's
called a Form seven oh nine. Think of that Form
seven oh nine. It's called a gift tax return as
the certificate. Right, So let's say I can give away
fourteen million dollars during or after life. Well, if I
(07:25):
go over that nineteen thousand, I have to start filling
out that certificate aka Form seven oh nine that keeps
track of how much I'm reducing my lifetime exemption amount.
Now final thought here on this kind of little section
is that at the end of twenty twenty five, the
federal estate and gift tax exemption amount is scheduled to sunset.
(07:46):
Assuming Congress and the President take no action, this gift
tax exemption could decrease to approximately seven million dollars per person.
So it's about fourteen million dollars it could decrease to
seven Now, I'll be frank with you, we have no
idea whether or not this will change. There's people guessing
that it will change under on the Trump administration, but
(08:06):
we we really still do not know. So just be aware.
Lifetime amount you can give away is fourteen million. Now
it could be down to seven million as early as
twenty twenty six.
Speaker 2 (08:17):
Talk this morning with CJ.
Speaker 1 (08:18):
Closs and Eric Schwartz, our retirement planning professionals from Class Financial.
Their website Class financial dot com. That's Coss Klaas Financial
dot com and they're telephone number six So eight four
four two five six three seven that's four four.
Speaker 2 (08:31):
Two fifty six thirty seven.
Speaker 1 (08:32):
Don't forget no charge for that initial get to know
you appoyment at Class Financial.
Speaker 2 (08:35):
AIG will be complementary to you.
Speaker 3 (08:37):
What are some of the things then, CJ that we
do know.
Speaker 4 (08:41):
Yeah, so just just some things for people to be
aware of. Here there are again there's no taxes on
the giver and again usually no taxes paid by the recipient.
Now I say usually, and people hate that word, they
would be definitive. Well, listen, if you if you gift stock,
highly appreciated stock to your child that you have not
paid the capital gains tax on. Well, if you gift
(09:05):
them that, you're gifting them not only the value of
the stock, but also the basis of the stock. Aka,
you didn't pay tax, they're going to have to pay tax.
So if you give them that stock and then they
go and sell it, they're gonna pay the capital gains
tax on it. But assuming you're giving cash of some sort,
so money you've already paid tax on. So not retirement accounts, right,
because you can't gift money out of a retirement account
(09:26):
that's pre tax. But let's say this is money in
a checking savings stock account that you've already paid tax on.
Generally speaking, you as the giver will pay no tax
and the recipient will pay no tax. Now here's a key,
one of the biggest questions. We get this is great, well,
then I will just I'll give nineteen thousand to each
of my children and then I'll deduct that on my taxes.
(09:47):
No no, no, no, no, no no no. We didn't
say you'd get a deduction. They are not charities. So
that's where the kind of the line in the sand
comes in here. The good news is you don't have
to pay any tax. They don't pay any tax upon
rescups even get assuming it's cash. But it does not.
It's not a gift to a charity, and therefore you
cannot deduct that gift to your children. I mean, that
(10:09):
would be great, and then if we could just give
money away to our children and take it off our
own income for the year, But that is not the
way that it works. And so I already mentioned as
long as you are aware of that nineteen thousand dollars
limit and you try to avoid going over it to
any one individual in a year, then you don't have
to fill out that Form seven o nine. And the
beauty there is then you preserve your lifetime exemption amount.
(10:33):
Now why would you want to do that, Well, because
when you die, everything you own, including any life insurance
proceeds goes towards that lifetime exemption amount. So there is
kind of this incentive to try to preserve that if
you don't need to use it. Now, I'll admit to you,
for ultra wealthy family families, they're actually not trying to
(10:54):
preserve that. They're actually trying to do very large gifts
to use up their lifetime exemption amount and then get
large portions of their estate out to an irrevocable trust.
But more to come on that later in our show. Today.
Speaker 2 (11:05):
We'll get to that and so much more as we
continue our conversation with CJ. Closs and Eric Schwartz.
Speaker 1 (11:09):
Of course, they are our retirement finding professionals from Class
Financial the website Coss financial dot com. That's Coss k
l A A S Financial dot com. And they're telephone
number six so eight four four two five six three seven.
So Eric, let's talk then about if you give money
to someone, do I have to pay a gift tax?
Speaker 5 (11:29):
That's a great question, Sean. In most cases, as CJ
was saying, there is no gift tax to be paid. However,
if there is, you know, we just talked about a
bunch of the ways of UH. Basically excluding gifts from
your taxable income. But if there is a tax to
be paid, the donor is generally responsible for paying that tax.
(11:50):
There are some special arrangements where where the receiver can
can pay the tax, but in most cases it's going
to be the donor. But let's I want to dig
in here a little bit more on some of the
exceptions and why we say, you know, generally there's not
going to be any gift techs do on this. So
the one that the first one and the one we
talk about most often with our clients and CJ is
(12:12):
just talking about here, is the any gifts that don't
exceed that nineteen thousand dollars per individual per year. Those
are that's your freebie, right, That's not even going to
be considered when it comes to your your lifetime credit
or anything. So that nineteen thousand number is generally what
people are focusing on when they're when they're giving money
(12:33):
to those non charitable organizations, regardless of how the parents
feel about the kids. Another exclusion is going to be
a tuition or any medical expenses that you pay for
someone else. So I'm going to discuss more about this
in a moment. In terms of the rules around that.
But the you know, tuition support, medical expenses that you
(12:55):
pay off, those are not subject. Those are those are
not subject to the gift texts.
Speaker 2 (13:00):
Fantastic, Oh go ahead, No, I'm.
Speaker 5 (13:03):
From gifts to your spouse. So the irs allows you
to gift as much as you would like to your spouse,
assuming that they are US citizen. And finally, gifts to
a political organization for its own use, those are are
automatic subject any gift tax rules.
Speaker 2 (13:22):
Really important.
Speaker 1 (13:23):
It's interesting that they that the politicians would leave that,
leave that little loophole there for you.
Speaker 2 (13:27):
It really is ironic.
Speaker 3 (13:29):
I'm talking this morning with CJ.
Speaker 1 (13:31):
Closs and Eric Schwartz, our retirement planning professionals from Class
Financial website Class.
Speaker 2 (13:35):
Financial dot com.
Speaker 1 (13:36):
That's Coss k l a as Financial dot com and
their telephone number six so eight four four two five
six three seven. We'll continue our conversation with CJ and
Eric and take your call next as Money in Motion
with Class Financial continues right here on thirteen ten doll
will u ib A getting charitable this week with our
retirement planning professionals from Class Financial, Eric Schwartz and CJ.
Speaker 3 (13:55):
Closs the website you can learn more about Class.
Speaker 2 (13:57):
Financial, the team, the separate divisions.
Speaker 1 (13:59):
Also and sign up for the weekly market Ball's newsletter
and listen back to this in previous shows podcasts.
Speaker 2 (14:05):
All of that available to you at class financial dot com.
Speaker 1 (14:07):
That's colss k l a as Financial dot com at
the teleph number six so eight four four two five
six three seven. No charge for that initial get to
know you appoyment dech loss financial. It will be complimentary
to you. So, Eric, just before the break, we started
talking about some of the areas where there would not
be a gift text. What are some of the other
benefits then of giving gifts to families or other folks?
Speaker 4 (14:33):
Yeah, I think.
Speaker 5 (14:34):
I think in general it's nice to give a gift
and actually see the recipient enjoy it, rather than waiting
until you're no longer here. So we see a lot
of people once they've kind of gotten to a point
where they feel comfortable that they have enough for themselves,
they will begin gifting to their kids and and beyond that.
If you're giving to children, for example, they probably have
(14:56):
a greater need for that financial support when they're in
their thirty or their forties compared to when most folks
pass away. So let's think about this. If people live
into their seventies or maybe their eighties, their children are
likely closing in on retirement when they pass away, and
they've already had to do, you know, a lot of
(15:17):
the what i'll call it financial hard work at by
that point. So are they going to be grateful for
the gift, obviously yes, But will it be as impactful
as it would have been when they were younger. Probably not.
And you know, so, I think those are just a
couple of things we think about when we're thinking about gifting,
specifically to family. And regardless of who you decide to
(15:41):
give to or when you decide to start gifting, it's
really important to create a gifting strategy. So, like I said,
once you have enough resources to take care of your
needs during your lifetime, giving assets to your children or
to charities, which we haven't talked too much about yet,
it could be helpful from the state planning perspective, and
(16:01):
it can have a really really large impact on the
quality of life of your errors your favorite causes, and
for yourself, a strategy for gifting can help you minimize
your future state taxes and really really want to drive
home the fact that if you're giving to family, giving
(16:21):
to them earlier on generally is a lot more impactful
than waiting until later. But earlier we were talking about
the gift tax exclusion for education and medical expenses, and
I mentioned that we were going to dig into that
a little bit more because it's a little bit more
complicated than the nineteen thousand dollars rule. So one of
(16:44):
the exceptions to the nineteen thousand dollars annual gifting limit
is that you can give an limited amount to your
children for tuition or medical expenses. So education and retraining
that can be an excellent way to help your kids
be more self sufficient, and you know it has the
potential to make them more employable or maybe even help
them earn more in their current job. But two really
(17:07):
important things to understand around the education and medical expense
exception was that the money it must be paid directly
to the educational institution or the medical provider. It cannot
go to the kids first. At that point you're going
to be subject to that nineteen thousand dollars rule again.
(17:28):
And then helping to pay off student loans would not
count as an exception unless you were a co signer
on the loan. That's despite the fact that it originally
came from tuition obviously, but you must have been a
co signer on that loan in order to not have
it count as a taxable gift. And the last thing
(17:48):
I want to talk about in this section here is
another great way to benefit your errors is by giving
them money that they can then contribute to their retire accounts.
Speaker 4 (18:00):
Okay, so.
Speaker 5 (18:02):
If you think about an individual retirement account, the annual
contribution limit to that is currently seven thousand dollars a
year for those who are under fifty. So you could
give a gift to the kids with the expectation that
it is then used to say for their future.
Speaker 1 (18:18):
It's really really good to really good to options and
really really good opportunities for folks, and of course something
worth exploring. You can learn more online Clasfinancial dot com
delvium number six so eight four four two five six
three seven so CJ. Earlier, you kind of alluded to
trust that we were going to get into them a
little bit more. Let's talk about using trusts to make gifts.
Speaker 2 (18:38):
What do we need to know there?
Speaker 4 (18:40):
Yeah, so we're going to talk about those trusts. I
do want to make a quick comment on what Eric
was just mentioning there on retirement accounts, because, as Eric
can attest, every once in a while we'll have somebody say, hey,
I heard what you saw said on the air, and
I want to make a contribution or set up a
roth IRA for my adult daughter and put seven thousand
dollars into it, and we go, hmm, you slightly misunderstood
(19:03):
what we were saying there. So just to clarify, you
can give money to your children. You can't be making
contributions on their healf without their awareness. Now give a
minor child. That's a little bit different. There's these things
called custodial retirement accounts or custodial roth I raise. I
was just helping a client set up one yesterday on Fidelity.
But generally speaking, what Eric is saying here is like
(19:23):
you can give it with the expectation of a going
into a retirement account, which is again it can be
a huge blessing to your children when they have cash
to live off of, so that those earnings that they
receive from their employer can go into a retirement account. Well,
that being said, yes, so your question about trust and
what I alluded to earlier, so a state planning just
(19:46):
it's not just about preparing for the future, it's also
about taking strategic steps during your lifetime to benefit your
loved ones. Using specialized trust can help you pass on
wealth efficiently, reduce taxes, and preserve the value of your estate.
So here's a breakdown of three key points as it
relates to trust and kind of gifting and moving money
(20:07):
to the next generation while being tax efficient. Item number
one would be an irrevocable trust. This can shift growth
to the next generation. So here would be a concept.
Let's say that I own I've been blessed throughout life,
I built maybe a small business. That small business has grown,
I don't know, I own a good portion of it,
(20:28):
and suddenly I'm left in a position where I go, goodness, gracious,
my stock when I die is gonna put me over
some of these limitations on lifetime exemption amounts. And now
again these are large amounts, right, but often people say,
what the heck do I do? Because I've got these
lifetime exemption amounts, I can only gift so much to
(20:49):
my kids without using up my lifetime exemption. So how
does this work? C how could I and not to
mention I've still got the business. This this thing is
still growing. It could be fifty eighty one hundred million
dollars by the time I die, and then my family
just has to get blown up with taxes. Well, no
one thing you can do if you're operating agreement allows
(21:09):
for it, which you do have to start getting pretty
specific here on working with lawyers and accountants. But is
you can actually gift some of that stock into an
irrevocable trust. Once it goes into the vocabal trust, two
things happen. You are using up some of your lifetime
exemption amount that you know, fourteen million dollars we talked
about to put money into that trust. But let's say
I put ten million dollars hypothetically of that highly appreciated
(21:31):
you know stock into that irrevocable trust. Well, all the
future appreciation on that is now outside of the estate.
It can still benefit my children, so it can still
say the beneficiaries of this stock are my children. But
the beauty is I have used some of my lifetime exemption.
I've gotten that money into a trust, and then all
the future appreciation of that stock is outside of the
(21:53):
estate and it can't impact my lifetime exemption amount. Another
concept might be, so stick with that idea of the
highly appreciated stock. Well, what if I my corporate governance
doesn't allow for that, or I just don't want to
put that much money into an irrevocable trust, or I
should say that much stock. What are other options? Well,
another option would be doing what's called an irrevocable life
(22:16):
insurance trust known as an islet. Because we know our
industry loves our acronyms, so islets. It's this idea of saying, Hey,
I'm going to keep all that stock inside of my estate,
but I don't want to my kids get blown up
on taxes when I die. What do I do? Well,
you could buy a life insurance policy inside of an
irrevocable life insurance trust if you do it all appropriately,
(22:39):
and by the way, you really need to work with
a lawyer, accountant advisor on this is not something to
try to do on your own and my humble opinion,
but if you do it all appropriately, that large life
insurance policy when you die can come swooping into the
estate without counting towards your federal estate tax exemption amount.
So it comes swoop in And why does it come
(23:01):
swooping in to pay all the taxes, right, so it
pays the taxes without increasing your taxes. So ear Vocal
Life Insurance trust can be a great way to pay
final expenses, pay pay any taxes that would be due
upon the estate without kind of forcing the beneficiaries to
have to sell a bunch of your stock or to
(23:21):
have to, you know, sell a bunch of land. Think
of a farmer with a lot of land. So these
can this can be another great estate planning tool. And
then finally there's these concepts of grantor retained annuity trust
known as grats. And I will just warn everybody, as
much as I love talking about this, just a word
to the wise, none of these strategies we're talking about
(23:42):
should be something you jump on Google and say, I'm
gonna I'm gonna do this tomorrow. Please don't. These are
advanced financial planning strategies that often require you know, expert
legal advice, good accounting advice, good financial advice, advisor feedback.
So with that being said, though, the concept of a
grant or retained annuity trust is that they're ideal for
(24:05):
gifting assets that are likely to appreciate significantly in value.
So a lot like the irrevocal trust. So this could
be again privately health shares of a company, you know,
hedge funds, private equity stocks, real estate interests, and closely
held business and you transfer assets to the grat and
retain the rights to receive an annuity aka income for
(24:26):
a set period. When the trust term ends, any remaining
assets pass to your beneficiaries free of federal gift tax.
This allows you to lock in today's asset value while
giving your loved ones the benefit of future growth, while
also getting some income along the way. So think of
that original irrevocable trust concept I talked about at the beginning,
(24:49):
that once it's out, it's out, you can't get it back.
Whereas this granted retained annuity trust, you still can't get
the money back, but you can get an income stream
off of it, which can be nice because lest you
put the money in you use part of your lifetime exemption.
That money goes to your children a state tax free
later on. But along the way you're able to get
an income stream to you know, offset any any income
(25:12):
needs you have in retirement. So very advanced estate planning techniques,
this is actually just the tip of the Iceberg of
various estate planning advanced estate planning techniques, but these are
a few that we see commonly, commonly used.
Speaker 2 (25:27):
Really fascinating stuff. This week, as we talked with CJ.
Speaker 1 (25:29):
Closs and Eric Schwartz, oh were retirement finding professionals from
Class Financial, the website COSS Financial dot com. That's Coss
k l a A S Financial dot com and their
telephone number four four two, five, six three seven. More
of Money in Motion is next right here thirteen ten
WI b A and the website Colss Financial dot com.
That's k l a A S Financial dot Com. They're
(25:52):
telephone numbers six so eight four four two, five, six
three seven. Coming up with later this segment will do
our class quiz quesch Leak, So you want to hold
on to that number for that as well. Talking this
week about charitable giving and Eric, what about incorporating charitable
giving into our estate planning.
Speaker 5 (26:09):
Yeah, we've been talking a lot about giving gifts to
family members or other individuals in your life, but we
wanted to touch on charitable giving here a little bit
before the end of the show. And when it comes
to charitable giving, there are more options than just writing
a check to the charity, and I know that's how
most folks will do it, but there are some more
(26:31):
we'll say advantageous options as well. So whether you're looking
to give back to your community or just support a
cause that you really love, there were some really impactful
ways to do that. We're going to look at four
of them here briefly. The first one is the simplest. Okay,
so it's just an outright charitable gift. This is, you know,
sending a check to the Salvation Army or whichever organization
(26:55):
is important to you. You're giving cash directly to the charity,
and provided that you are able to itemize your taxes,
you can often get an income tax deduction for this,
and you know, in the long run it can also
reduce your estate taxes, and you know, really simple win
(27:17):
win for the charity and for the individual. But the
second one here is is actually when we're seeing a
lot more since since the Tax Cuts and Jobs Act
raised these standard deductions so high and made it less
likely that folks will itemize their taxes. And that's a
donor advised fund or a daft CJ says, we love
(27:38):
the acronyms, but think of this as like your personal
charitable giving account. So when you contribute dollars to this
fund that you set up at you know, a brokerage
house or wherever it is, you get an immediate tax benefit.
Speaker 4 (27:53):
Okay.
Speaker 5 (27:54):
So let's say you put in a big chunk of money.
Let's say you put in twenty thousand dollars. You get
an immediate twenty thousand dollars today deduction. But you don't
have to give all of that money right away to
the charitable organizations. Okay, it gives you time to decide.
It can be you know, years before you actually give
the money out of the out of the account. Now,
(28:17):
it's important to remember, even though you don't have to
give all the dollars to the charitable organizations immediately, your
contribution is irrevocable.
Speaker 4 (28:24):
Okay.
Speaker 5 (28:25):
The IRS gave you a deduction, they're not going to
allow you to take it out later on. But these
funds can remain in the account, they can be invested,
they can grow tax free, and you can you can
have some flexibility and time in making your charitable giving decisions.
And the really really important part about this is it
(28:46):
allows you to what we call bunch your gifts in
one year, so that you can get enough to deduct
to use the itemized deductions and actually be able to
deduct the contributions, and then you know, in future years
you can give the dollars away having gotten that large
tax benefit right up front. The last two that I
(29:09):
want to talk about here are actually forms of irrevocable trusts,
which CJ was just just talking about in our last
section here. The first one is a charitable lead trust.
So this arrangement allows a charity to benefit first from
the dollars and basically any income generated by the assets
(29:29):
in the trust goes to a charity for a set
period of time. After that, the remaining assets are passed
to your beneficiaries, all while potentially lowering your estate tax burden.
So it's a great way to support an organization that's
important to you, but also leave a legacy for your heirs.
And then the last one here is a charitable remainder trust.
(29:51):
So this is the reverse of the charitable lead trust. Okay,
so in this case, your beneficiaries are receiving income from
the trust for a set period of time time and
then any assets left over go to the charity at
the end of the term. So you'll receive a charitable
deduction upfront, you'll reduce your state taxes, and this approach
allows you to support a cause while ensuring that your
(30:14):
loved ones are still cared for for that set period
of time. Now, I know all of these strategies seem
like I don't know. People may to hear them and say, gosh,
that just seems so far away from me. I'm not
going to think about that right now. But thinking about
these strategies earlier, it gives you more control and flexibility
in managing your legacy. So whether you know you're trying
(30:35):
to protect your state, maximize your growth, ensure liquidity, all
of these are going to be more impactful if you
actually think about them strategically and plan for them ahead
of time, and make sure you speak to a professional
to see how you can implement these two best benefit
you a lot of.
Speaker 2 (30:55):
Great tools and a lot of great options.
Speaker 1 (30:58):
Just got to make sure that you're putting these things
in place and putting that plan together. If you've got questions,
don't forget great website cossfinancial dot com great resource you
can learn more about Class financial folks. At class Financial
you can learn about their separate divisions as well, that's
all at Cossfinancial dot com. That's Coss Klaasfinancial dot com
and their telephone number six oh eight four four two five,
(31:19):
six three seven. And you want to hold on to
the telephone number. Now it's time for the Class Quiz
Question the Week.
Speaker 2 (31:23):
It works like this.
Speaker 1 (31:24):
In just a moment, I'll ask you the Class Quiz
Question the Week. You then have thirty minutes from the
today's program to call the Class Financial Office right here
in Madison at six oh eight four four two five
six three seven. If you are the first caller with
correct answer, you'll win this week's prize, which is a
twenty five dollars gift card to the cheesecake Factory. This
week's Class Quiz question week is this what amount can
(31:45):
you gift per person in twenty twenty five with no
federal gift tax consequences? Is it fifteen thousand dollars or
nineteen thousand dollars? Telephone number six oh eight four four
two five six three seven. First call correct answer, we'll
win that twenty five dollars gift card too the cheesecake factory.
Don't forget as well, that's Class Financials Office right here
(32:05):
in Madison again the number six O eight four four
two five six three seven CJ Eric. Always great chatting
with both of you.
Speaker 2 (32:12):
Guys.
Speaker 4 (32:12):
Have a great day, thanks Sean, Thanks Sean, take care guys.
Speaker 1 (32:15):
Doctor Marty Greer joins us next here on thirteen ten
WIV eight
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