If you’ve ever donated your time or money to a local shelter, soup kitchen, charity, or great cause, then you are likely familiar with the feeling of satisfaction that comes with knowing you are making a difference in the lives of others. For many years, I volunteered with Girl Scouts, and my husband helped lead our sons’ Boy Scout troop. When I give my time, I always find that I get more back than the effort I extend. The relationships that develop and the general enrichment of my life are incredibly rewarding.

This month, we celebrate World Giving Day, during which we embrace paying it forward and sharing with others. For so many people, having a purpose outside of yourself, whether it’s helping to cure diseases, fighting for our country, helping animals, assisting the less fortunate, doing good for the environment, or simply lending an ear to a friend, brings so much joy and satisfaction.

Even small gestures constitute giving, like dropping money into the basket at church, donating a few dollars or supplies to the Red Cross when disasters happen, or paying for a cup of coffee for the person in line behind you.

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Sometimes we want to give larger monetary gifts — we might consider helping our child purchase their first home, paying for a wedding, or covering medical bills for a friend, parent, or relative. But financial gifts may have tax consequences, so it’s important to know the rules:

* Payments made directly to a medical or educational institution (e.g., to make someone’s medical bills or tuition payments) do not incur ANY gift tax, regardless of the amount.
* Direct outright gifts of less than $17,000 ($34,000 per married couple) per year to any number of persons are exempt from gift tax. So, a married couple could gift up to $102,000 in one year to each of their child, the child’s spouse, and a grandchild. If you do this for ten years, you’ve transferred over $1 million outside of your estate!

You can also set up special types of trusts for the benefit of persons you care about; it’s important to have a qualified attorney set up these trusts (and for you to operate the trust properly year after year) so gifts to the trust qualify for the annual exclusion.

You can also make gifts that exceed the annual exclusion amount without paying gift tax. However, when you do this, you are using a portion of your lifetime exemption from gift and estate tax (currently $12,920,000), and you need to file an informational gift tax return with the IRS to notify them about the gift. Once the cumulative amount of these gifts exceeds $12,920,000, the gift tax applies to the amount gifted.

There are also opportunities to combine charitable gifting with tax planning! You can donate appreciated non-cash assets (such as stocks or real estate) to vehicles like donor-advised funds (established with community foundations or financial institutions) and charitable trusts. When the asset is then sold by the donor-advised fund or charitable trust, you potentially eliminate the capital gains tax you would incur if you sold the assets yourself and donated the proceeds.

These tips are all things we help our clients with on a daily basis. No matter how big or small, we are happy to talk to you about how you can incorporate charitable giving into your life and estate plan. Give us a call today. We are happy to help!