Although the holiday season is supposed to be a relaxing and memorable time spent with family and loved ones, many people often feel pressured to find the perfect gift. Grandparents and parents in particular may find it difficult to get gifts that younger family members really want and will find useful. Here are a few alternative gift ideas that could make a long-standing impact on someone’s financial future:
529 plans are a great gift that can have a positive impact on all generations involved. It’s a generous gift for parents when it’s gifted by a grandparent because it can significantly decrease the cost of private and/or higher education for a child. The giver of a 529 plan can also potentially benefit from deductions on their state income tax.
Charitable giving is another popular alternative gift giving option. However, it’s more beneficial to give cash to family members as a gift and donate highly appreciated stocks to charities. This will help the receiver avoid tax implications, and charities can sell the stocks without any capital gains. Keep in mind, if a highly appreciated stock is gifted to a child or grandchild, they’re also gifted the tax burden.
Stocks are also a fit for young family members, especially for kids. When choosing a stock to gift, it’s helpful to choose a few shares of stock from a company you know the receiver likes. This way, it could pique their interest and encourage them to learn how stocks work. This gift has the value of the share and the ability to teach the value of investing.
Cash is king. People used to be encouraged to gift out of their estate to avoid Federal estate tax when the Federal estate tax exemption was much lower than it is now. Since it’s now over $11 million per person, most people won’t run into Federal estate tax issues. Giving in advance can help family members avoid inheritance taxes and provide other benefits. The giver will have the benefit of being able to experience the act of giving this money to their family members. They can also give money to young adult family members to fund a Roth IRA. Young adults in particular benefit from this investment vehicle because it will always grow tax free and it doesn’t have any required minimum distributions.
Although a new pair of skis or the latest tech gadget may be something family members will enjoy, it’s only temporary. These alternative ideas are just some ways investors can provide their family members with gifts that have long-term financial benefits.