The Gift That Keeps on Saving: Tax-Efficient Giving Strategies

Have you ever wondered about the most effective ways to share your wealth with loved ones or give back to causes you care about—all while minimizing tax implications? Whether you're considering helping your children buy their first home, making a meaningful charitable donation, or strategically planning your estate, gifting can help you give back while reducing your tax liability.

In this episode of Capital Conversations, host Ryan Potts and Correct Capital’s founder and CEO, Brian Pultman, discuss tax-efficient gifting strategies and how to make the most of your generosity while securing your financial future.

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Below is a transcript of our most recent podcast episode, "The Gift That Keeps on Saving: Tax-Efficient Giving Strategies."

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Ryan Potts: Welcome back to another Capital Conversation. I am your host, Ryan Potts, and today we have a special guest, our founder and CEO, Brian Pultman.

Brian, how are you doing?

Brian Pultman: Doing great today. Good to be here at the world headquarters of Correct Capital Wealth Management.

Ryan Potts: Absolutely. Absolutely.

Today we have a very unique conversation. We get to talk about tax efficient gifting strategies. Brian, obviously working with some of our larger clientele, and your experience in the industry over the last, I don't know, maybe a couple of decades. You have some experience with gifting strategies.

So I think ultimately what we should maybe talk about first and foremost is what are two things that are very important that everyone should know about gifting?

Brian Pultman: I would have to say as far as the concept of gifting goes, first and foremost, you want to make sure that financially you are prepared to be able to gift.

So we have a brand new financial planning tool here at Correct Capital that we just migrated over to called Right Capital. And it's very important to go ahead and put your goals and your expenses in this program to validate the fact that you are in a position to be able to gift freely so you won't need that money back. So number one, you wanna qualify yourself as a gifter.

And two, perhaps you have an interest [in] gifting to your children or family members now while you're alive, you can enjoy seeing them enjoy a better quality of life.

So those are two high level items there themselves.

Ryan Potts: Absolutely. And it's important to note, if you're someone who is considering gifting, every year you have different exemptions that you need to be aware of.

Obviously our lifetime gift exemption, which I'll let Brian talk about a little bit, because this will go into some of the strategies that we talk about later. But you have that lifetime exemption, and then also on an annual basis every individual has $18,000 that they can go ahead and gift without reporting.

I think it's important to know, as someone who is looking to do gifting, if you're planning on gifting over $18,000, that will go against your lifetime exemption.

So I'll pivot back to Brian again as the expert here.

Brian Pultman: So the two areas, the basics, are going to be the annual gift you can give is $18,000.

If you're married, you can split it with your spouse and actually give $36,000 to each individual, each child, without having to take anything from this lifetime gift exclusion. That one time lifetime exclusion is actually $13.61 million currently. That's expected to sunset [at the] end of next year.

Now, based upon the recent election, we anticipate that they're not going to reduce it. There was some conversation that, If another party would have won perhaps, they would reduce that back down to $7 million or even $5 million which for people that have means, that's a real big issue because 45% of your estate could go back to the government.

Ryan Potts: And that's a big deal for those who have a net worth in an estate upon passing that's above the exemption limit.

Brian Pultman: That's correct.

Ryan Potts: As someone who maybe is married, when you look at that $13 million that it stands currently, If you are married or have a spouse, does that exemption become $26 [million] or is it $13.6 [million] per household?

Brian Pultman: It's $13.6M per individual if the assets are actually held correctly. And what I mean correctly is that if you just have all your assets held in joint names, there might be a problem in terms of actually claiming $13.6 million for each individual husband and wife.

On the other hand, from advance estate planning, we would recommend, perhaps in some cases, to each the spouse and yourself to have your own revocable living trust. That way you can ensure the fact that you split your assets equally amongst yourselves in the taxable side, so that you can actually make sure you get full credit of $13.6 million, if you're so blessed.

Ryan Potts: I think that's a great foundation to pivot and move forward and talk about, what are some common gifting strategies that you've seen your clients implement? Now that we have the basis of the understanding of your annual gift exemption, and then also that lifetime exclusion that we just referred to.

Brian Pultman: The basic gifting is going to most likely be to an individual. So there's going to be three different areas you're going to want to gift.

One, it's an individual. Maybe it's a child, a niece, a nephew, some other family member in need. And you can gift, go ahead and give in cash. That's the easiest way to do it.

If you decide to give stock – please note, for example, if you gave Apple stock that has very highly appreciated – the cost basis will go over to the individual you gifted to. If they would sell it, they would still have a capital gain if it's ahead. However, if it's a loss and they sold it, they were not eligible to take the loss.

So if you have any positions you had that have a loss, you're better off selling it in your own account and then gifting over the stock. So once again, stock is a little bit more tricky. Cash is an easy way to go.

Ryan Potts: I know we talk about this quite a bit with our clients here, but we do see that, someone has maybe Apple or Berkshire or one of those legacy positions that's highly appreciated.

Depending on the location of that asset in terms of the estate, it might make sense to have the client retain ownership of the asset until they pass, and then take the step up in basis, and then you get to pass that along.

Brian Pultman: Absolutely.

Ryan Potts: But I know another strategy that we are talking about is maybe you're not wanting to gift to an individual, but maybe there's an organization or you're a charitably inclined. And there are other things to think about other than gifting to someone within your family.

What are some areas that we want to think about?

Brian Pultman: When you're thinking about gifting to a charity, you have a couple things to think about. One, you can go ahead and just gift annually as you wish. However, if you take a standardized deduction or if you itemize, you need to talk to your accountant or tax preparer.

What we've been recommending is for clients that have the opportunity to set up a donor advised fund. That way you bunch the three or five or 10 years worth of gifting it all at one shot and you're able to take a larger tax deduction that year. Then you can dole out that money over a period of time until that money runs out.

Number two, another gifting area could be Education 529s. Being that education is very important to most people I would encourage people to consider a gift to an Education 529 where you have a lot of flexibility. One, you control the asset still. Number two, you can change the beneficiaries. And three, you may, in certain states such as Missouri, get some minor discount or deduction on your state taxes.

We had an earlier episode a while back about giving money from your IRA directly to a charity. That's something still I would recommend, especially for 70 and a half years of age and older.

Ryan Potts: And that would obviously be described as a Qualified Charitable Distribution, or QCD as some might know. And as Brian just alluded to, we have a prior episode that goes into depth a little bit more about what that might be.

Thinking about the IRA distribution – and also you mentioned the donor advised fund there.

Brian Pultman: Correct.

Ryan Potts: I think donor advised funds are not as pronounced in the industry. Or maybe individuals, clients might not know what they are. Who might those benefit the most, or why might we use a donor advised fund when we think about gifting strategies?

Brian Pultman: Just to be able to take a larger tax deduction in one current year than trying to just give a smaller amount out each year, because the smaller amount you give out each year, you may not qualify for any deduction off your taxes.

Ryan Potts: In summary there, if you're someone who knows that you're charitably inclined and you maybe have another 10, 20 years in your time horizon in your financial plan, it might make sense to bunch all that charitable contribution into one year, get the tax deduction, which also might be used to offset some type of a capital gain that occurs that year. The sale of a business, the sale of a highly appreciated stock. Anything else that might make sense in that year.

When thinking about maybe special exemptions, I know this one comes up, but you already mentioned the 529 in education, but there's also a medical exemption or basically being able to gift to make a payment directly for a medical expense.

Brian Pultman: Correct. So if you're already in a gift to each of your children, $36,000, assuming you're married. Number two, in addition, you can actually gift directly to a medical institution or an education institution directly, unlimited. [It] does not count against the annual $18,000 exclusion.

Ryan Potts: Perfect.

And I'm glad you brought that up, because I think going back to where we started this conversation with the lifetime exclusion versus the annual exemption, as a client who says, “I would rather give my kids $50,000 this year so they can have a down payment towards a home.” That's an example.

How would a client need to go about, not necessarily filing or reporting that, but how would any additional or excess funds over that $18,000 per year affect the annual exclusion amount?

Brian Pultman: There's a form from the IRS, a 709, that must be completed. Your accountant or tax preparer can actually assist you in preparing that, just to keep tally of how much of that lifetime exclusion you actually use up. So they can keep an accounting measurement of that money.

Ryan Potts: Perfect. And then, also, ultimately, it's just the difference. So whatever you're taking over $18,000 -

Brian Pultman: Correct.

Ryan Potts: Let's say it's $20,000, You would just take $20,000 minus $18,000.

Brian Pultman: And if you have an inclination to gift $50,000 or $100,000, I would actually recommend trying to do it maybe over two or three years, depending on how many kids you have, and making sure that you spread it out and hopefully not use that annual exclusion if you don't have to.

But if you have to, it's not the end of the world.

Ryan Potts: I think at the end of the day, to summarize all of this, there's a lot of unique ways to go about gifting. If it's to an individual, if it's to maybe someone who's outside of your family, which is also part of gifting. If it was to be to an institution or a charitable foundation, there's a lot of strategies and a lot of unique ways to think about getting money outside of your estate.

As the Tax Cuts and Job Act expires or sunsets at the year, it's important to think about it from a High-net-worth individual's perspective. How is my estate going to be handled when I'm no longer around? And we hope that you're working with a financial professional who are taking those things into consideration and who are taking a holistic view when it comes to not only just your gift strategy, but also maybe tax planning and your portfolio as a whole.

Brian is there anything that you want to leave the audience with in terms of gift strategies and things that we could do on this front to maybe help them out?

Brian Pultman: Yes. The last thing in closing I would say is gifting is a very nice thing to be able to do, whether it's to your children, family, or to a charity. Giving back is very important. However, I would say that if you decide to give large amounts of money, that you need to be concerned about the fact that money stays within your family lines. And if you're looking to give large amounts of money to help a child buy a first time home, you might want to consult with your attorney, perhaps have some agreement signed up. If they would go ahead and sell the house, or if they would get divorced, that you have the first right or refusal to have that money come back to the family estate.

Just an FYI. We're here to protect you.

Ryan Potts: Absolutely. Thank you again for tuning in for another Capital Conversation. As I said in the intro, my name is Ryan Potts. This is our founder and CEO, Brian Pultman. Until next time, have a great day.

The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing.

As always, please remember investing involves risk and possible loss of principal capital. Please seek advice from a licensed professional. Correct Capital Wealth Management is a registered investment advisor. Advisory services are only offered.

Capital Conversations | Correct Capital Wealth Management

Gifting isn't just about transferring money—it's about creating a legacy, supporting loved ones, and contributing to the causes that matter most to you. At Correct Capital Wealth Management, we’re here to ensure your gifting strategy aligns with your financial goals and values, helping you make the most of your resources while keeping your wealth secure for the future. Contact Correct Capital Wealth Management today to discuss how we can help you design a gifting strategy that works for you and your family.You can schedule a meeting with a member of our advisor team, contact us online, or give us a call at 877-930-401(k), or give us a call at 877-930-401(k).