Graduate & Wedding Gifting

June 24, 2019

It’s already that exciting time of the year when every weekend is packed full of graduation parties and weddings. During this season, clients frequently reach out to discuss their gifting plans for the year. Here are a few FAQ’s on the topic:

How much can I gift tax-free in 2019? 

Each donor can gift up to $15,000, tax free, to each donee. For example, if you’re married, that means that you and your spouse could gift up to $30,000 tax free to your daughter for her wedding. You could also gift her partner another $30,000 tax free because they are a separate donee.

Can I set up an investment account for them? 

Roth/Traditional IRA: Opening a retirement account is a great way to inspire a new investor! In order to be tax-free, contributions are limited to the before mentioned $15,000 limit. Additionally, donees may not contribute more than they earn in a year to their retirement account. For instance, if your son made $4,000 working part time during 2019, then you could not contribute more than $4,000 to an IRA on his behalf.

Brokerage: If the recipient of your gift doesn’t have earned income, setting up a taxable account is also an option. This can be a great alternative to a typical savings account, since the investments will have the opportunity to outpace inflation.

How can I help set them up for future investing success? 

Education is the key in inspiring investors! Share with them the magic of compound interest. For instance, if you gifted your 22-year-old grandson $5,000 and the investment grew by 6% each year, when he turned 62, that gift would be worth more than $50,000! You can also encourage others to learn more about investing by relating it to their interests. Consider buying them stock from their favorite company or sharing your experiences with investing over the years.

Gifting is also a great opportunity to help younger generations plan for the future. This can be a good opener to talk to the recipient about their plans for the future and how you can support them in achieving their goal. Relevé is happy to come alongside during these chats and assist in any way we can.

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