Mark Reckman - Season of Giving

SEASON OF GIVING

Each year about this time, we pause to talk about the upcoming Holiday season. 
This season is about family and friends. It’s also about recognizing others and giving 
thanks for what we have. And it is a time to think about folks who are less fortunate. 
That brings us to today’s topic: GIFTING.

Broadly, there are two types of Gifts: 

1. Gifts to individuals (usually family); and
2. Gifts to charity.

A. Gifts to Individuals

1. Gifts can consist of anything – cash, stocks, bonds, real estate, jewels, 
cars, etc. Tax law treats all gifts the same way.
2. Gifts can be made during your life (intervivos) or at your death 
(testamentary). Tax law treats both types the same way.
3. Lifetime federal gift tax allowance for 2024 is roughly $13.6 million dollars 
per person ($27.2 million per couple). There is no longer a state gift tax in 
Ohio (since 2013).
4. The annual exclusion amount for 2024 is $18,000 per recipient. Gifts 
under that amount are not reportable to the IRS and do not reduce your 
lifetime allowance. Next year, people are predicting that exclusion will go 
up to $19,000 per person, per year. 

5. Gifts are not taxable income to the recipient.
6. Gifts and cost basis (“cost basis” is the price you paid to buy the 
investment):
a) gifts made during life: the person receiving the gift assumes the cost 
basis of the person making the gift.
b) gifts made at death: The cost basis of the gifted asset is “stepped up” at 
the date of death.

B. Gifts to Charity. 

Charitable gifting dropped in 2022 – for only the 4th time in 40 years. It dropped 
by about 3.5%. Nationwide, gifts to charity were just under $500 billion in 2022 that 
rebounded to $557 billion in 2023. 

Gifts to charities pre-approved by the IRS can be deductible on your 1040 up to 
60% of your AGI, but, in many cases, 20%, 30%, or 50% limits can apply. Gifts to 
charities made at your death, are deductible on your estate tax return – without 
limitation. 

There are over 1.5 million “approved” charities. Most donations are made to 
religious charities. Education and human services are a distant second and third place. 
Fastest growing category is to Foundations. 

When making a testamentary gift, consider using qualified funds. This avoids 
both estate tax and income tax on that money. 


Consider this idea to build charitable giving into your family’s “culture.” When the 
kids/grandkids get a little older, put some portion of the money used to buy gifts into a 
“pot.” Everybody contributes. Then, convene a family meeting and make a joint 
decision to give it to a charity or list of charities. Not only does this “teach” charity to the 
next generation, it will give much greater meaning to the Holiday Season. It also 
reinforces family values. And, believe me, the kids in the family learn from this.

Episode Transcript

Speaker 1 (00:04):
You're listening to Simply Money, presented by all Worth Financial.
I'm Amy Wagner. Is the season for holiday shopping, caroling, coco,
so many things, but I think also for many of us,
it's a season where we start to think about how
blessed we are, how abundant our lives are, and how
do we make an impact in gift away some of

(00:26):
what we have joining us tonight our estate planning expert
from the law Farm of Wood and Lamping, Mark Rekman Mark.
What are the conversations you have having during this kind
of season of giving.

Speaker 2 (00:38):
Well, actually, there are lots of different kinds of gifts,
but the vast, vast majority fall into two categories, and
that is making gifts to your family individuals or making
gifts to charity, and they are handled a little differently.

Speaker 1 (00:54):
Okay, let's start with for many people, you know, gifts
to individuals, our family members.

Speaker 2 (01:00):
Well, gifts to individuals can consist of anything amy. They
can be cash, stocks, bonds, real estate, jewels, or jewelry, cars,
et cetera. And the tax law in the US and
Ohio treats all of those different kinds of gifts the
same way. Gifts can be made during your life. We

(01:20):
call those iprovivos from the Latin, or the gifts can
be made at your death, and we call that testamentary
also from the Latin. And again, tax law treats both
of those kinds of gifts, in other words, gifts during
life and gifts after death. Tax law treats those almost
the same way. Now, we've got a federal gift tax

(01:41):
limit during your lifetime. In other words, there is a
there is a cap on how much money you can
give a way to an individual during your life each year. Now,
when I say there's a cap, it's really it's it's
really a reporting threshold, right and all.

Speaker 1 (02:00):
So it's something that I probably will not ever have
to worry about meeting us.

Speaker 2 (02:06):
Well, that's right. So your lifetime allowance is thirteen point
six million dollars per person, So Amy, if you double
that for a couple, you're a twenty seven point two million.
That's when at that point you start paying tax on
gifts over that amount. So you're right, ninety nine percent
of us will never have to worry about that. But

(02:28):
there is another trigger point, and that is there is
an annual exclusion amount for gifts that you make to
families or to friends, and that's eighteen thousand dollars per
year per person. And see now this is a reporting threshold, Amy.
If you give away less than eighteen thousand dollars to

(02:49):
any one person, there's no reporting at all, and it
has no effect on your lifetime allowance. So this eighteen
thousand dollars threshold, if you stay below it, there's no paperwork.
If you go above it, you have to fill a
paperwork to report the gift, but it's still not taxable
until you've used up your thirteen million dollar lifetime allowance.

(03:11):
So as a practical matter, there really is not much limitation.
There's just paperwork about making larger gifts during your life.

Speaker 1 (03:19):
And I've got some clients actually mark right now that
are trying to gift some to a couple of their children.
And you can do eighteen thousand from you and your
spouse too, and if that person is married, you can
also gift it from both of you to both of them.

Speaker 2 (03:38):
That's right. Put another way, Amy, that's eighteen for me,
eighteen for my wife, eighteen for my son, eighteen for
my daughter in law. That comes out to fifty two
thousand dollars to four people.

Speaker 1 (03:50):
All right, and let's talk about so gifts made at
death versus gifts made during your lifetime.

Speaker 2 (04:00):
Gifts are not taxable if they're made during your lifetime.
In other words, they're not income to the person that
you give the money to. However, if I give money
to or stock or property to my son, he assumes
my cost basis in that. Now there's no cost basis
for cash. So I'm talking about gifts of things like

(04:23):
property or like stock, and cost basis that's the price
I paid when I bought that investment. So if I
give away a stock that I paid one hundred dollars
to share for and I give it to my son,
my cost basis is one hundred dollars. He takes over
that cost basis, so his cost basis is one hundred.

(04:44):
If he turns around then sells it for one hundred
and twenty thousand dollars, then he's got to pay tax
on the difference between the sale price and his cost basis.
In this case, that would be twenty thousand dollars, and
he would pay what we call capital gains tax. That's
a little different than income tax, but it's on the
same form. It's a little the tax on capital gains

(05:06):
is a little bit lower, So there is that tax impact.
Now that does not apply to gifts I make at
my death. So if I leave my house to my
son in my will, and if I pay five hundred
thousand dollars for my house, but when I die it's
worth seven hundred and fifty thousand dollars, that's a two

(05:29):
hundred and fifty thousand dollars gain. If I give that
to him during my life, he's got to pay tax
on that two fifty. If I give it to him
in my will when I die, he pays no tax.
He gets a step up. We call that a step
up in his cost basis, which means that his cost
basis is the value at my death or seven point fifty.

(05:50):
If he sells it for seven to fifty, there's no gain.

Speaker 1 (05:54):
I think that's a great kind of wrap up on
for anyone who's looking at gifting real estate, money stock
to someone. Let's talk about though, if we want to
gift to a charity.

Speaker 2 (06:07):
Yes, now that's a big deal. Americans are actually quite
generous when it comes to gifting from charity. Now, there
was a slight drop during the pandemic, so in twenty
twenty two, for only the fourth time in forty years,
the amount of gifting that year dropped down by about
three and a half percent, But that's come back up
again in twenty twenty three, and of course we don't

(06:29):
have figures yet. For twenty twenty four, gifts to charities
came to a total of about five hundred and fifty
seven million dollars I'm sorry, billion, with a B billion
dollars in twenty twenty three. And by the way, gifts
to charities that are pre approved by the IRS can
be deductible on your ten forty up to sixty percent

(06:52):
of your adjusted gross income lot in many cases, most
cases there are twenty percent, thirty percent, fifty limits that
apply on that deduction. Now, gifts made to charities at
your death, those are deductible on your state tax return,
and there is no limitation on gifts at death and mark.

Speaker 1 (07:15):
There's a lot of strategies that can go into gifting,
and I know many people do this just because they're
inclined to they're just charitably inclined. They want to help
other people. But it can be a win win situation
from a tax standpoint as well. There's strategies that we
can employ here.

Speaker 2 (07:33):
There certainly are. And one of the things that has
been the fastest growing area is gifts to a foundation.
So people who are charitably inclined and wealthy, they can
create a charitable foundation. They hire a lawyer or an accountant,
they set up a foundation, they get the foundation approved
by the irs, and then they leave their money at

(07:55):
their death to that foundation, and then that foundation doles
the money out over time. And that gives the ability
to spread your money out, but also to put someone
like maybe your kids, to put someone in charge of
picking the right charity, so when charitable needs change over time,
the foundation can change with it.

Speaker 1 (08:16):
I think great insights and advice, Son, if you are
charitably inclined, how do you make an impact not only
on your children and your loved ones, but on the
charities that are near and dear to your heart. Great
insights as always from our state planning expert from the
law firm of Wood and Lamping, Mark Grekman. You're listening
to Simply Money presented by all Worth Financial Year in
fifty five KRC. The talk station