financialforum
Smart Giving
Take advantage of new rules so your children or grandchildren
can make the most of your gifts — and you can avoid potential
tax complications. By Phil Dyer, CFP
M
any parents and grandparents year at a 5-percent average annual rate of
follow the time-honored adage return — would grow to $540 by the time
’tis better to give than to receive your child or grandchild reaches age 18.
by giving to children and grandchildren. Incentive giving: Are you looking for
However, recent tax law changes make it a way to help your child or grandchild
important to think before you give, so you save money without giving them every-
can make the best use of your gift without thing? Consider an incentive gift program
triggering unexpected tax consequences. where you will match at 50 percent to
Consider the following when deciding 100 percent on the dollar any contribu-
how — and what — to give: tions your child or grandchild makes
Help With The
2009 Annual Gift Tax Exclusion: The toward a goal. For instance, if your grand-
Costs of College
2009 Annual Gift Tax Exclusion has in- daughter recently has entered the work-
a73 MOAA’s Degrees of creased from $12,000 to $13,000. This force and wants to start a Roth IRA, you
Success
®
529 College
limit is per donor, per donee, so a married could match 50 cents for every dollar she
Savings Plan is a great
way to help children or
couple is eligible to give up to $26,000 an- puts in. If your son just had his fi rst child,
grandchildren with the
nually to a single individual without hav- suggest a Section 529 college savings plan
costs of college. Visit
ing to fi le a gift tax return. to help with college costs and match your
www.moaa.org/529 A common mistake that many well- son’s contributions dollar for dollar, pay-
for more information.
meaning parents make is placing their adult ing huge dividends down the line.
children on their bank accounts or on the When is a gift not a gift? Direct tuition
deeds to their homes. Placing a non-spouse payments to educational institutions (sec-
on a bank account, brokerage account, or ondary, graduate, undergraduate, and trade
residence technically constitutes a gift of schools) and to medical institutions are
50 percent of the value of the asset to that exempt from the $13,000 annual gift tax
person, which can cause tax complications. exclusion. This means you could assist a
Instead, use “transfer on death” or “payable grandchild in covering private high school
on death” designations for bank and broker- or college expenses, provided you pay the
age accounts, if allowed by state law. Finally, school directly. Make sure you consult your
placing a child’s name on an account or tax advisor and the school’s fi nancial aid of-
using the annual gift tax exclusion does not fi ce to be certain you do this correctly. MO
protect assets from Medicaid spend-down
rules, and making such gifts can disqualify
— Former Army Capt. Phil Dyer, CFP®, is
the donor from Medicaid nursing home
deputy director, Benefi ts Information and Finan-
benefi ts for as many as 60 months.
cial Education. To fi nd a fi nancial planner near
you, contact Garrett Planning Network at
Not another toy: While $25 could buy
(866) MOAA-GPN (662-2476) or
www.moaa
your 3-year-old child or grandchild a doll
.org/garrett, or visit
www.moaa.org/fi nancial
or racecar, that same $25 — invested each center for other resources.
4 2 M I L I T A R Y O F F I C E R A P R I L 2 0 0 9 PHOTO: SEAN SHANAHAN
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forum.indd 42 22/26/09 6:17:49 PM/26/09 6:17:49 PM
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