NuVision FCU December 2015
What's the Best Way to Give Money to Children and Grandchildren?

In 2014, the IRS allows you to give up to $14,000 annually (or $28,000 if you give jointly with your spouse) to each of as many people as you'd like in cash, investments, and/or property without triggering gift taxes. (This limit may be adjusted for inflation in future years.)

If you're thinking about giving money to minor children, such as a new grandchild, it might make sense to take advantage of The Uniform Gifts to Minors Act or The Uniform Transfers to Minors Act (UGMA/UTMA) depending on your state. An UGMA/UTMA account allows you to establish a savings or investment account in a child's name, with one adult named as custodian. Each parent or grandparent can contribute up to $14,000 annually without triggering a gift tax.

With an UGMA/UTMA strategy, the first $1,000 per year of unearned (investment) income is tax free. For children under 18, anything between that amount and $2,000 is taxed at the child's rate. Any income exceeding $2,000 for children under 18 is taxed at the parent's rate. For children over age 18, all income is taxed at the child's rate.

Of course, asset gifts are not limited to young children or newborns. You can also give to as many adults as you'd like up to $14,000 a year. Keep in mind, however, that the IRS considers the value of the gift its cost basis for purposes of computing gift tax to be its value at the time that it's given, not when you originally purchased or invested in it. By making a tax-smart financial gift to an adult-aged child, you could help him or her fund a down payment for a home or afford to maximize contributions to an employer-sponsored retirement plan.

If you're thinking about starting a gifting program, a qualified financial professional can help you evaluate which strategies might be appropriate for your situation. The amounts of your annual gift exclusions are limited to a lifetime total. 2014 limit is $5,340,000 ($10,680,000 for married couples).

Dwight Lee, Craig Fein and Boris Castillo are LPL Financial Consultants located at NuVision Federal Credit Union. If you have any questions or would like to make an appointment, please call Dwight Lee at 714.375.8227, Craig Fein at 714.375.8222 or Boris Castillo at 323.859.5563.

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© 2015 Wealth Management Systems Inc. All rights reserved.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

Representatives are not tax advisors or legal experts. For information regarding specific tax situations, please contact a tax professional. For legal advice, consult an attorney. Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered through Kinecta Financial & Insurance Services, a subsidiary of Kinecta Federal Credit Union. CA Insurance License #0E24631. Insurance and investment products: 1) are not NCUSIF insured; 2) are not obligations of or guaranteed by the credit union or any affiliated entities; 3) involve investment risk, including possible loss of value. Kinecta Financial & Insurance Services and Kinecta Federal Credit Union are not affiliated with LPL Financial. Some insurance products available to California residents only.

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