You’ve worked hard, saved well, and now you’re thinking about giving back—maybe to your kids, your grandkids, or a cause you care about. But should you wait and pass that wealth on later, or give while you’re still around to enjoy the impact? Let’s talk about how to make that decision with confidence.
Helpful Information:
PFG Website: https://www.pfgprivatewealth.com/
Contact: 813-286-7776
Email: info@pfgprivatewealth.com
Disclaimer: PFG Private Wealt...
You’ve worked hard, saved well, and now you’re thinking about giving back—maybe to your kids, your grandkids, or a cause you care about. But should you wait and pass that wealth on later, or give while you’re still around to enjoy the impact? Let’s talk about how to make that decision with confidence.
Helpful Information:
PFG Website: https://www.pfgprivatewealth.com/
Contact: 813-286-7776
Email: info@pfgprivatewealth.com
Disclaimer: PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.
Marc:
Welcome in once again to another edition of Retirement Planning, Redefined with John and Nick, and we're going to talk about gifting money while you're alive or leaving a legacy. You work hard, you saved well, so let's talk about how to gift and leave a legacy.
Welcome into the podcast everybody. Thanks for hanging out with John and Nick and myself as we talk about these topics this week. And guys, it's gifting, right? So I want to go over some basics here. It seems like there's been a trend the last couple of years for people to enjoy their retirement legacy with the family versus the old way of you pass and you'll leave a check, right? Here's your inheritance, we're gone, that kind of thing. So let's talk about that a little bit this week on the show and just kind of see what you guys are seeing in your neck of the woods. How you doing this week, Nick?
Nick:
Good, good. How about yourself?
Marc:
Doing pretty good's. How's the wedding action coming?
Nick:
Planning's moving along.
Marc:
Nice.
Nick:
Did some, hopefully we got the food picked out, so trying to check off all the big things, so.
Marc:
That's important. Got to have that good food going on for sure. Well, good. Kudos. Good. Glad to hear that. And John, my friend, how are you this week?
John:
I'm good. I'm good. Summer just started for the kids, so getting used to waking up in the morning and they're hanging out with me as I'm getting ready for work-
Marc:
And they're ready to go.
John:
Versus me just dropping them off. Yeah.
Marc:
That's right.
John:
It's a lot of fun.
Marc:
There you go. Are you guys seeing this trend that I talked about, not necessarily a new trend. It's been going on for a number of years now, but I think where people just want to maybe enjoy some experiences with their loved ones while they're still here versus just leaving that check, so to speak? Are you guys seeing that in your practice as well?
Nick:
Yeah, I'd say so. We've had, what are we on now? A 14, 15 year bull run from the standpoint of people have kind of exceeded what their perspective on goals was for the money that they might have in retirement and, so especially I would say, at least from what I've seen, the vacation side of things is kind of the biggest thing that people have been doing where they'll do a large family vacation and pay for the kids and their families to go so that they can all enjoy that together.
Marc:
Yeah, that's very cool. And we'll talk about some of the numbers and things in just a few minutes, but John, I'll kick this over to you. I'd say the first step probably still should be, make sure you are covered first, right? We all want to leave and do things for our kids and loved ones, but don't sacrifice your own retirement in order just to do that. Is that a fair place to start?
John:
That is 100% where you should start. The last thing you want to do is start gifting and spending money on a vacation, and then you look at it and you're like, "Oh man, I don't have enough money to live anymore." So first thing we do in this situation where it comes up with clients is like most things we say, we look at the plan and we will stress test it and look at different scenarios to make sure, hey, if this were to happen, how does your plan react to it? So we'll throw out some scenarios out there, whether it's healthcare, inflation, social security, things like that. And if the plan looks solid, we will typically give somewhat of a green light of, we think you should budget X amount for this. Or we can also look at scenarios where Nick talked about vacation, but we've seen some others where it's like, "Hey, I want to help my son, daughter with a home purchase." And with the way prices are going now, it's very difficult for first time homeowners to be buying houses. So we've seen a lot of people basically lending, not giving money to their kids for buying homes. So we will put that in the plan and say, "Hey, what does your plan look like if you were to give X amount for a down payment?"
Marc:
Gotcha. Okay. And we'll talk about some of those numbers and ways to do that here in a few minutes. So I would say if step number one, as John pointed out is make sure you are covered. The next step number two is maybe just kind of clarify your motivation. He kind of touched on that a little bit, but why are you giving, I mean, again, we all love our kids. We want to help, but what's the purpose? Is that an important kind of factor to decide through?
Nick:
Yeah, I've had some recent conversations where maybe there's specific topics like, okay, we're off conversions, and because somebody has read or seen an article or something like that, the thought process is, all right, well let's go ahead and let's convert all of our qualified money to Roth accounts and leave the money to them. And a tricky thing with that can be, as an example, is maybe their kids are not in the same sort of economic space as they are and they're not going to ever make nearly the same amount of money. Them taking a hit right away from a tax perspective maybe doesn't make sense, so try to take them back to the initial point in, Hey, what's your motivation? What are you trying to do? What's most important to you? Is it making sure that your plan is structured well to protect you first and then start to do some giving while you're alive? Or is it more focused on you want to give after you pass away and let's structure your assets accordingly?
So just so many things, making sure that you fully understand what your objectives are because it can be a little bit of the shiny new thing or a shiny new strategy that weren't familiar with at first or initially, and then once you go through and evaluate it in more detail, maybe it doesn't make a whole lot of sense. But yeah, really understanding how account types work, what your goals are and really what your focus is really important.
Marc:
And of course, working with a financial professional is going to help you identify that because often we're not going to know what the account types and the rules and the taxation things are going to be, so that's why you want to turn to the pros on that. So let's get into some of the numbers a little bit, guys, because I actually want to point out a couple of things that based on what you've said so far, and just kind of ask you some clarifying questions on that. But let's start with understanding the gifting rules. So John, what's some of the numbers that we need to know if we just want to gift money in general?
John:
So you want to look at what is the gifting amount before you trigger having to file a gift tax return or putting that on your return that you gifted money. So this number changes from year to year typically, and in 2025, it's $19,000 per person. So example, let's say you have a mother, father, and they want to gift to a child. They can each give $19,000 apiece.
Marc:
So married couples 38 grand, right?
John:
Yes. So that's a good starting point. And then if you have grandkids involved or whatever, you can start gifting to that. So it's $19,000 per person per year without triggering the gift tax filing.
Marc:
And that's hefty. Now I'm sure somebody listens going, "I love my kids, but I ain't giving them 38 grand."
John:
Again, everyone's situation's different.
Marc:
And you can do that. And it doesn't matter if it doesn't have to be family either, right? This could be anybody, right? You can give 19,000.
John:
It can be anybody. Yeah. If you want to just find a random person in the street, you're more than welcome to-
Marc:
Your favorite podcast host. I mean, podcast hosts need love too, so I'm just saying.
John:
Yeah. So that's definitely the starting point. If you're going to be gifting money to any particular individual. If you want to help out with tuition and medical expenses, as long as it's paid directly towards those institutions, you don't have to file any type of gift tax return.
Marc:
Now, I wanted to ask you about that because a minute ago you guys were talking about helping with school. Now you can't gift the money and pay the loan, right? It's not paying the student loan, it's paying the tuition. There is a difference there, correct?
Nick:
Yeah. And you want to pay it directly to the institution.
Marc:
Gotcha. Okay. That's important to know too, right? I'm sure from a tax standpoint as well. All right. What about QCDs, John? Can we do that in that arena as well? If you want to do some gifting?
John:
Yeah. So let's explain what that is. So it's qualified charitable distributions from your IRAs. Nick and I use this quite a bit. So when we're doing the fact-finding with clients, one of the main, not one of the main, but one of the questions we go through is, do you do any charitable gifting? And if they check that box, we'll typically find out what institutions and how much they're giving. And once someone hits RMD age, a great way to save on taxes is gifts directly from your IRA. So you could save quite a bit depending on how much someone's gifting. So example, we have someone that doesn't necessarily need their distribution from the IRA, and they were just taking money out of just cash flow, whether it was social security or pension, they were gifting it to their church. What we would typically do is say, "Hey, let's kind of switch this. Let's go to, let's pull out of the IRA." Let's just use number. Maybe it's 10 or 15 grand and we're going to go directly from the IRA to the charitable institution. In this example, it's a church, and you don't pay any taxes on that amount that came out.
Marc:
That's ideal, right? And Nick, thinking about how you, if you're a charitably minded person and talking about leaving a legacy, since this kind of rolls into this conversation, people often ask, "Well, which account should I use for what?" And John mentioned that earlier. So if you're thinking about leaving money to your kids and you've got money in a Roth, you might want to leave the kids that right? And then maybe QCD some money from the IRA over to the church, for example, because that's a tax benefit to everybody. Correct?
Nick:
Yeah, for sure. That makes sense. I would say to one kind of red flag, or at least something to be very aware of and had this conversation recently with a client is, while you're alive, if you're in a position to be able to gift and if you're in a position to be able to choose where you want to gift money from, avoid gifting from highly appreciated assets from the standpoint of let's say there's a property or there's a taxable brokerage account that maybe you've held 10 different stocks for 20 years and they have a substantial gain. If you gift that while alive, then the recipient, when they sell those is going to pay taxes on the gain versus if you gift it after you pass away, those investments will get a step-up in cost basis, which can save a significant amount of money from a tax perspective. So I would say where you gift from is absolutely, probably if this is something that's important to you, that's where the largest amount of strategy comes into play and doing it from the right place.
Marc:
Nick, any other things we missed as far as with the QCD or some of the numbers there?
Nick:
Yeah, one thing that we have run into is that some custodians, including the one that we use, Charles Schwab, they don't send out a specific tax document when somebody processes a qualified charitable distribution. So that's something that you want to keep records of and indicate that you've done that with your tax preparer. We've had a couple of clients where they were anticipating that they were going to receive a specific document that laid out exactly what they did, who it paid to, and that sort of thing and that was not the case. It shows the distribution via the 10-99, but they have to notify the tax preparer and usually provide some sort of documentation showing that they made that gift to a charity. So just from a best practice sort of standpoint, that's something to keep in mind.
Marc:
All right. All right. Good stuff guys. So as always, if you've got questions and concerns, need some help when it comes to any kind of the financial pieces, the X's and O's when it comes to retirement, you always want to check with qualified financial professionals who do this day in and day out. And John and Nick certainly do so if you need some help, reach out to them online at pfgprivatewealth.com. That's pfgprivatewealth.com and don't forget to subscribe to the podcast on Apple or Spotify or whatever podcasting app you enjoy using. You can reach out to the guys on the website. You can also call them at (813) 286-7776. And don't forget to tune in for new episodes as they come out. I appreciate the time guys. Thanks so much for being here and we'll catch you next time here on Retirement Planning, Redefined with John and Nick.
Get yourself a plan, get yourself a strategy. Reach out to John and Nick today at pfgprivatewealth.com, that's pfgprivatewealth.com, to get started on your situation or to tweak your situation and dive into that process with the guys. You can reach out to them at 813-286-7776. Or again, find them online at pfgprivatewealth.com. Don't forget to subscribe to us on the podcast on Apple or Spotify, or whatever platform you like using. We'll see you next time here on Retirement Planning Redefined with John and Nick.
