Congratulations, you made it through Christmas / Hanukkah / Kwanza, despite the fact you were seated next to your anti-vaxxer cousin who tried to explain to you in two syllable words how the earth actually is flat. All nieces and nephews have been given your gifts (likely a sweater instead of the cool toy they desperately needed to show off to fit in on the school bus), all dishes are cleaned, and all the leftovers have been thrown out unless you are a bachelor. BUT WAIT!! You haven’t wrapped up the Holidays until you make a complete drunken fool of yourself on Snapchat slurring Old Anzine (it’s pronounced “Auld Lang Syne” in Scotland for some reason) and have made the following gifts BEFORE the ball drops on 2018:
Annual Exclusion Gifts: You can gift $15,000 every year to every U.S. person for any reason without it affected your lifelong gift or estate tax consequences (the “Annual Exclusion”).
- You may gift this to anyone’s 529 Plan; you can be a mere Donor and don’t have to be the Owner of the plan but remember the plan’s Owner has the ability to take the money out themselves, which is indubitably schmucky but legal.
- You may leave it to an UTMA account for a minor; this is okay if the minor has no future drug / creditor / spending problems / government benefits when they turn 21, because they are entitled to the entire amount without exception when they turn 21. And let’s face it: Only your perfect sibling (Hint: your parents’ Favorite Child) is responsible enough for that.
- You can make annual exclusion gifts to an irrevocable life insurance trust [“ILIT”], and it never hurts to get ahead in funding your ILIT provided you haven’t reached the annual exclusion for each ILIT beneficiary during that year.
Charitable Gifts: Remember Santa waiving a bell outside of your grocery store before this year’s awesome adventure tracked on the Santa Cam by every network’s most-awkward stand-in meteorologist? You may be surprised to learn that was the Red Cross asking for donations (not Santa), and this time of year is when they and other charities push to receive your much-needed charitable donations.
- You do need to make donations before year-end to get a tax deduction for this year, so hurry up slacker! Making out a bank check before January 1st should better-ensure you are credited the deduction.
- Contact the financial company managing your retirement plan and tell them to send your Required Minimum Distribution [“RMD”] directly to your choice of charity to ensure you receive the full deduction instead of a portion of it.
Convert Your IRA to a Roth IRA: Technically this is not a current gift. Indeed, you will owe taxes on the conversion, which is quite the opposite of Holiday cheer, but by converting your IRA to a Roth you ensure your children will not have to pay income taxes on distributions when the account gets rolled-over at the time of your passing, so a Roth Conversion is kind of like a future gift. True, your non-spousal beneficiaries still need to take RMDs, but they will appreciate your steps to minimize their tax consequences, since they will likely be in their peak earning years when you pass away.
And remember: Time is of the essence! Make sure to take that extra-long lunch break and map out your gifting before the confetti falls and reminds us we are all one year closer to incontinence and forgetting how old you are.