Holiday Gifts With a Twist!
The holiday season is a time for joy and giving. While kids love unwrapping those colorfully packaged gifts, why not consider a present that extends its value way past the holidays?
Financial gifts can be a fantastic way to set up the younger generation for future success, and they might even offer you a tax benefit. These gifts may not come with shiny bows, but their long-term value is undeniable. Let's explore some smart financial gifting options for this holiday season.
529 College Savings Plans
We all know how expensive education has become. A 529 savings plan is an excellent way to start funding a child's education. These are state-sponsored investment plans, quite similar to 401(k)s, where your contributions are invested for long-term growth. Plus, there's typically an option for prepaid tuition plans to lock in current rates. The best part? While your initial investment isn't federally tax-deductible, the growth is tax-deferred, and withdrawals for educational purposes are tax-free. Some states even offer tax credits or deductions on your annual investment in a 529 plan.
Gifting Stocks: A Generous and Smart Investment
Gifting stocks is a fantastic way to pass on your investments to loved ones. By transferring your own stock shares, you're not just giving a present; you're sharing a piece of your financial legacy. The recipient of these shares can reap the benefits of any dividends the stocks might yield and has the option to sell them in the future, potentially at a higher value. This can be particularly valuable for younger family members as it introduces them to the world of investments and can contribute to their long-term financial health. The process usually involves coordinating with your broker or financial advisor to ensure the transfer is smooth and complies with all necessary regulations.
Savings Bonds: The Gift of Future Security
Savings bonds are another excellent gift option, especially for those looking for a more secure, long-term investment for their loved ones. Purchasing savings bonds has been made incredibly easy and can be done entirely online through the TreasuryDirect website. These bonds are essentially loans to the government, and in return, they pay interest over time. They can be purchased in various amounts and mature over a set period of years. This is a thoughtful gift that can help secure the recipient's financial future, providing them with a nest egg that grows over time.
And good old cash? Always welcome. For larger sums, consider setting up a trust or a dedicated account that matures when the recipient is older.
A Quick Note on Gift Tax
For 2024, you can give up to $18,000 per person without incurring gift tax; this amount will increase to $19,000 in 2025. This applies to 529 contributions, bond purchases, or any financial gift. If you're planning to transfer stocks, be mindful of any related rules and regulations.
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This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can only be provided to clients of McPhillips Law in response to a specific fact situation.
