Are Your Clients Ready For 2023? Set Them Up For Success

Advantageous Gift Ideas For Your Clients

Many Americans associate December with holiday gift-giving, so it is a great time for you to remind your clients of a valuable planning opportunity: year-end gifts. In making lifetime gifts, your clients will experience the pleasure of immediately benefitting their loved ones while helping to shape their legacies, for example, by funding a loved one’s education or continuing a family tradition of charitable giving. A much larger proportion of your clients can benefit from year-end giving, as the doubled gift and estate tax exemption amount will sunset at the end of 2025, returning to $5 million adjusted for inflation in the absence of legislative action. The following are several advantageous ways for your clients to make year-end gifts.

Direct payment of medical expenses. Your clients can make an unlimited number of tax-free gifts by paying their loved one’s medical expenses. These gifts should be made directly to the medical providers rather than to your client’s family members or friends. In addition, it is important to verify that the payments are for expenses that would qualify as deductible itemized medical expenses on the tax return of the individual receiving the healthcare.

Direct payment of tuition. Similar to paying medical expenses, your clients can pay for their loved ones’ tuition. There is no limit on the number of tax-free gifts or restrictions on who can benefit from them, but payments must be made directly to the educational institution, not to the parents or students themselves. The payments must fall within the Internal Revenue Code’s definition of “tuition,” which is not limited to college or graduate school tuition, but also includes private school tuition for younger students. It does not include payments for living expenses, books, or other fees, however.

Charitable gifts on behalf of or in honor of a loved one. For clients who are charitably inclined or who want to honor a loved one by donating to their favorite charity, a year-end contribution to a qualified organization will also enable clients to claim a charitable deduction. Remind clients that they must keep records of any contributions, and they may need to obtain written acknowledgment from the charity to deduct cash or noncash contribution. There are additional requirements for larger noncash gifts. Your clients can claim their charitable deductions during their lifetime or at death, depending on the strategy they use.

Your Help Is Crucial

As your client’s trusted advisor, you can provide essential guidance by helping them determine when is the best time for them to make a gift, how large the gift should be, and what type of gift they should make. It may be more advantageous for your clients to give certain properties or accounts over others, and you can help them evaluate what type of gift will work best for them and their recipients. You can also inform clients about the tax consequences of their gifts and assist them in making sure the relevant tax forms or other paperwork are completed and submitted to the Internal Revenue Service (IRS). Please contact us if your clients would like to integrate their lifetime gifts into a comprehensive estate plan.