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00:04 Speaker 1: Welcome to Aging Insight with your hosts, John Ross and Lisa Shoalmire. This program is brought to you by...

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00:42 Lisa Shoalmire: Welcome everyone to another edition of Aging Insight. I'm Lisa Shoalmire, and I'm here with my co-host and partner, John Ross, and we are here to bring you information about aging in the Ark-La-Tex area. And it's important to us to talk about things that are important to you. So we talk about things such as remaining independent as long as possible, as into your age and retirement. We talk about not going broke as you age. And we also talk about not becoming a burden on friends or family as you age. So we know those issues are important to you, that's what we hear, so we do bring you information about them. Another issue that we often hear from community members that's very important to them, is the legacy that they leave as well as the gifts that they make during their lifetime. Folks, a lot of times, have accumulated a few things and material things may not be as important to them and they wanna share that and share their blessings with others. So we get a lot of questions about making gifts, gifting and doing charitable donations as part of those retirement years and contributing back to our community. So John, I thought we'd talk about that today.

02:17 John Ross: Yeah. And one of the things about gifts is your generosity is certainly appreciated by those who you've bestowed those gifts upon, but there's lots of little issues related to gifts. Issues that might be related to, for example, the tax consequences of that gift. There might be issues related to how that gift is gonna affect you down the road, when you need additional care. There might be issues related to the type of asset that you're giving away and whether or not you're giving it away during your life or at death. And so we wanna try to cover lots of stuff about gifts and how you do it, how you make them and what those consequences are.

03:03 Lisa Shoalmire: A gift can be a gift of cash, it could be a gift of real estate, a gift of stock or bonds. Basically, anything that you possess can be a gift. So we're not just talking about money here, we're talking about all the different types of gifts that you may give during your lifetime. And so the very first question I typically get as I'm talking with folks about their gifting intentions, is they are always concerned about tax consequences and tax benefits. Many of us are familiar, that is, we make gifts on an annual basis to perhaps our church or other organizations that are nonprofit organizations that we may be able to claim a tax deduction for that gift. So that's one of those tax benefits.

04:02 Lisa Shoalmire: But the next question I often get is, what about the tax consequences? If I make a substantial gift to my child or my grandchild, because maybe we have a child or grandchild who's looking to purchase a home and you are in a position and want to help them make that down payment. And you just wanna give that as a gift. Well, that could be a substantial financial gift. So there's always a lot of questions about the gift tax consequences about that. So John, I think there's a lot of confusion about gift taxes and when they're due, who has to pay them. So can you talk to us about that? 

04:44 John Ross: Yeah. Well, the first part about this is gift tax is tied to the estate tax. The reason we have a gift tax. Back in, I think it's 1916, is when they first created the estate tax, better known as the death tax. And essentially that if your total value of your estate at your death is over some limit, then when you die, there would be a portion of your estate that would be subject to tax. Back in 1916, the people who were at risk of being taxed, well, they got the bright idea, "Well, you know what? I'll just give everything away before I die and then when I die, I won't have anything, and therefore, there won't be any tax." Well, as with everything, they caught up with them. And the way they caught up with them is the gift tax. And so what the gift tax says is that if you have given away assets, there could be a tax. But now, first of all, who pays the tax? If there's a gift tax, it's paid by the giver. There's never a tax on the receipt of the gift. Doesn't matter how much it is. If I give you $50.000, that's tax free to you. I might have to pay a tax, but it's always the receiver never pays a tax on the receipt of a gift.

06:06 John Ross: Now, I mentioned that this is all tied to the estate tax, and that's because if you give away assets, the IRS wants to know about it, 'cause they wanna know whether or not if that's gonna affect your estate tax later when you die. So to make it easy for folks, they say, "Well, some gifts we're not gonna count." In fact, they say, "If you give away up to $14,000 per person, per year, you don't even have to report that."

06:35 Lisa Shoalmire: That's right. So from that standpoint, if you have five grandchildren, and you wanna put $14,000 a piece, times five, into a college fund for those grandchildren, you don't have to report a thing to the IRS about those gifts.

06:51 John Ross: Well, that's right. But if you give somebody more than that 14,000, what happens then? Well, it's not that there's a tax. See, you also have a lifetime exemption. The 14,000 per person, per year, is the annual exclusion, but in addition to that annual exclusion, you have a lifetime exemption. And currently, the lifetime exemption is 5.35 million dollars.

07:18 Lisa Shoalmire: Well, let me just interrupt you. If you think you have an estate or gift tax problem, because you might give away more that 5.3 million dollars over the course of your lifetime, then you need to call some professionals to help you manage that estate, and to prepare for that. I just don't get too many calls of folks that have that good problem of being in the position to give away more than 5.35 million dollars.

07:50 John Ross: Right, but for the rest of us out there, what's important is, for example, instead of I give you 14,000, let's say that I gave you 15,000. Well, the first 14, that's covered under my annual exclusion, that other thousand, all that does, is reduce my lifetime exemption from 5.35 million to 5.349 million. And so you know what? I'm never gonna pay a tax on that gift, and since there's never a tax on the receipt of the gift, you're not gonna pay any tax when you receive that. So for most people, gift tax is totally inapplicable. But there could be other things about that gift that are applicable to you, and when we come back from this break, we're gonna talk a little bit more about gifting and the types of gifts, and things you need to look out for. So we'll see you in just a second.

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11:02 John Ross: Welcome back to Aging Insight everybody, I'm your host, John Ross, here with Lisa Shoalmire. And today, on Aging Insight, we're talking about gifts. Before the break, we talked about the fact that, for most people, there's no tax consequences for those gifts. Because of that annual exclusion of 14,000 per person, and the lifetime exclusion of 5.35 million, there's just not a lot of people that are impacted by the gift tax. So keep that in mind. Now, when it comes to making gifts though, probably one of the biggest gifts that we see out there are gifts related to charities, gifts to churches. And oftentimes, people think of this as, "Oh, well, maybe they're Sunday offering." But there's lots of different ways that you can give assets to a charity or to a church that can benefit the church or the charity, but can also benefit you at the same time, other than just writing them a check.

12:13 Lisa Shoalmire: Well, that's right, John, and a lot of folks traditionally think about making gifts to charities through their estate plan. And that's a wonderful thing. And by that I mean, you provide for that charity in your last will and testament. But you know what? A lot of donors get a lot of satisfaction of seeing their donations at work with that charity while they're living to see it. So there's a lot of opportunities to give during your lifetime that makes you feel good inside and yet you get some tax benefits and maybe some other benefits during your lifetime. One particular way to do that is, you can essentially give what amounts to an annuity. Where you give a chunk of money, or a valuable asset to the charity, and during your lifetime, or for a certain period of years, you still receive the income from that donation. But yet the donation is, you get a tax deduction when the donation is made, and you can already see how that asset is going to be planned and used by that charity during your lifetime.

13:33 John Ross: And you can actually do it the kind of the flip side of that, and maybe you wanna provide some income for somebody else. But when that person dies, you want the remainder to go to a charity. And so for example, you might could provide that, you give this money so that it provides income to a child, a surviving spouse, or whoever, that it provides income to them for some period of time. And then when that person passes away, it then goes to that charity. The neat thing about that though, is even though the charity may not get that asset for some period of time, you might actually be able to take a tax deduction now. And so it's a way that you can enjoy a tax deduction for your charitable donation, you can provide some income either for yourself or for somebody else, and ultimately benefit that charity. So there is some creative alternatives out there when it comes to gifting and charity. And so I would certainly encourage you to explore some of those options, especially around tax time. When you're dealing with taxes and you get into this time of year, this may be the perfect time to deal with some of those issues.

14:55 Lisa Shoalmire: That's right. The charities themselves, they oftentimes have people within their organizations that can speak with you, and really talk to you about some different unique ideas, if you have an intent to give to that organizations, but you have some concerns or you feel like you may need some access to the assets, that kinda thing. Believe me, many of these organizations have people to help you structure your gift in a way that benefits both of you.

15:30 John Ross: That's right. And the other thing is, is that there are also certain types of foundations that are out there. There's private foundations. When I say that, I mean ones that are owned by a company. So for example, many financial advisor firms have a charitable foundation where you can actually contribute money to this organization that's managed by a brokerage firm. You get a charitable deduction now, but you're still in control of those assets and can dole them out to the charities over time. Those are what are called Donor Advised Funds. And they're typically managed by a brokerage firm, but that's a way of you being able to give the asset away for tax deduction purposes, but also be able to sprinkle it out over some period of years, and so you can kinda get the best of both worlds. But then there are also organizations out there that essentially do the same thing, like the Texarkana Community Foundation for example.

16:38 Lisa Shoalmire: Well, that's right. In our community, we have an organization, it's called the Texarkana Area Community Foundation. And this is a foundation made up of members of our community from different professions, from even different areas, from Texarkana, Nashville, and Atlanta and just all the surrounding area. And this is a community foundation where community members can pool their money, to where even if you wanna make a small gift, but yet you want to direct where your money goes, perhaps as it grows, you can do that with the Texarkana Area Community Foundation and you don't have to be a Daddy Warbucks, or a Kennedy family member to do it. Which I think is a really great thing.

17:26 John Ross: You just gotta have the heart. Well, certainly benefiting charities is great, and making big gifts to family members is great. But a lot of times, the things that means the most to you are the little things. The old family Bible, or maybe that clock that's been passed down. And so we're gonna take a break, and when we come back from this break, we're gonna talk about some options for making sure that the personal property that you have is gifted to the people that you intend for it to go to. So we'll see you in just a second.

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19:41 Lisa Shoalmire: Welcome back to another segment on Aging Insight, and today, we're talking about something that all of us enjoy and that is gifts. Before the break, John mentioned that sometimes the most important things to us, they may not have a tremendous monetary value, but yet they have just irreplaceable sentimental value. Maybe that pocket watch of your grandfather's, or that quilt that your great-grandmother made. A lot of times, there are family heirlooms that are appreciated and adored by certain members of the family, and you wanna make sure that those heirlooms get gifted to the right people. So John, tell us some simple ways that we can do that.

20:33 John Ross: Well, I'll give you an example of a conundrum from one of my clients here just in the last few days. She had a grandson and the grandson had called, and a little presumptuously if you ask me, but that grandson had called granny to say, "Hey, when you die, I want your car."

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20:57 John Ross: Well granny said, "Hey, you know what? I think that would be fine. So sure, I'll let you have my car." Then a couple of weeks later, she got a call from her son, one of her sons, not this grandson's father, but one of her other sons, and he said, "Well mom, since you're not really driving much any more, I believe I'll just take that car from you." And of course now, she's worried that she's gonna either upset her son or she's gonna upset her grandson. She doesn't wanna upset anybody in all of this.

21:31 John Ross: Well, first of all, when it comes to your stuff and what you do with it, it's your business, and don't worry about what anybody else thinks. If you wanna give it to one person, great. If you don't, great. If you wanna give it all to charity, great. I don't care and neither should you. Whatever makes you happy, that's what's important.

21:53 John Ross: But when you are doing some of these things, communication can be key. I can't tell you how many family fights that Lisa and I have had to try to resolve as best as we can. When you boil it all down, and it all comes down to the fact that mom or dad, they promised something to one person and then maybe promised it to somebody else at the same time 'cause they didn't wanna hurt anybody's feelings. Or that one child to say, "Mom told me I could have that clock," but she didn't tell anybody else she could have that clock.

22:33 John Ross: Anybody who watches this show probably knows what we're getting ready to say next. Put it in writing. Being able to communicate what you want to those people you leave behind, it really can be the difference between what you want happening, but not just that, what you want happening in a way that creates peace and harmony and a memory of you that makes people smile as opposed to one that makes people cringe because all they can think about is that fight with their brother.

23:07 Lisa Shoalmire: Right. A lot of times, that lack of communication leads to a fracturing in the family relationships, which is certainly something that most of us don't want. So when John says, "Put it in writing," when we're talking about these items that are of great sentimental value, but maybe not so much monetary value, that family Bible, that photograph, that 30-06 firearm that grandpa used. You don't have to do anything fancy. In fact, sometimes the most powerful thing that speaks to these other family members is a note in your own handwriting.

23:54 Lisa Shoalmire: So when it comes to these items, pull out a piece of paper, put a date on it, put it all out in your own handwriting that you want your only granddaughter to receive a certain piece of jewelry or you want your cousin so and so to get the family Bible. Just put it down in writing and that speaks to these folks, to the family members that otherwise, they may not believe a family member who says, "Hey, Mom promised this to me." But if it's in writing, in your handwriting, a lot of times that smooths a lot of feathers.

24:37 John Ross: Well, and even if you're making a distribution of something that you're gonna do while you're alive. Maybe you've decided, you know what, instead of just waiting until I die, I'll go ahead and give that family Bible to my daughter or my son or my grandchild or whoever it is. Making a little notation of that, again in this writing, doesn't have to be anything fancy. It's a letter from you, but if it says, "I already gave my daughter, Stacy, my Bible and so I want my son, Steve, to get all the fishing gear." At least now, even though you've already given that away, everybody knows. Everybody knows what your intentions were. Now, you can get creative with some of this. I had a client one time and she went to the office supply store and she bought a bunch of little colored stickers and each one of her children got assigned a color; red, green, blue and then she went around and put red stickers on some things and blue stickers on the other and that's the way she communicated who she wanted what person to get what item.

25:50 John Ross: If you were the blue child, then you picked up all the stuff that had a blue sticker on it. And actually the family really enjoyed that, they thought that was a great idea. It preserved some of that family harmony. And I'll tell you, we talked about in the beginning, Lisa opened this by talking about legacy. And if you wanna preserve that legacy, certainly one of the ways to do that is to prevent these disruptions, these arguments over stuff. And the way you do that is by either giving those assets away while you're alive and are competent to do so, or otherwise put it in writing.

26:31 Lisa Shoalmire: Well, and a lot of times if you do choose to give something away during your life, a lot of times you have the opportunity to see the recipient of that gift enjoy using it.

26:43 John Ross: That's right.

26:44 Lisa Shoalmire: That's also another big thrill that a lot of our clients appreciate. They're downsizing, they don't need all that fishing gear, they don't ever get out the good china, but they do get to see a young married granddaughter use it or a grandson use that fishing gear. So that's another good thing.

27:01 John Ross: That's right. Well, feel free to tell us your stories about gifts you've received or things that you wanna give away. You can post those on our Facebook page at Facebook.com/AgingInsight and you can catch us on the radio if you have questions, we're live every Saturday at noon on 107.1. You can call in and ask your questions. Otherwise, stay around and we hope to see you on the next episode of Aging Insight.

27:30 Lisa Shoalmire: Alright, see you then.

27:31 John Ross: Bye-bye.

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27:34 Speaker 1: Thank you for joining us for this week's Aging Insight program with John Ross and Lisa Shoalmire. This program is made possible by.

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