The holiday season often brings thoughts of generosity, whether it’s supporting loved ones or making a difference in the community. Gifting—both to family members and charities—offers not only personal satisfaction but also financial benefits. Let’s explore why giving now might be a smart financial strategy, and how both personal and charitable gifts can fit into your overall financial plan.

Personal Gifting: Supporting Your Loved Ones

Giving financial gifts to family members can create meaningful, immediate impacts on their lives while also offering benefits for your financial plan.

1. Reduce Estate Taxes

Lower Your Taxable Estate: Making gifts to family members today can reduce the size of your taxable estate. By taking advantage of the annual gift tax exclusion, you can transfer assets gradually without dipping into your lifetime exemption. Over time, these gifts can significantly reduce the tax burden on your estate.

Immediate Financial Impact: Gifting to adult children or grandchildren allows you to see the positive changes your support brings, such as helping with education costs, home purchases, or paying off debts. Rather than leaving a large inheritance, personal gifts provide timely assistance that can foster financial stability.

2. Maintain Control and Flexibility

Structuring Gifts Strategically: For those concerned about giving large sums all at once, there are various strategies to retain flexibility. Trusts, for example, allow you to control how and when the funds are used, while still benefiting your family members in ways that align with their needs.

Retain Financial Confidence: Personal gifts don’t have to be large to be impactful. By gifting gradually, you can still support loved ones while ensuring your own financial stability. Small gifts over time add up, allowing you to stay in control of your financial situation.

3. Foster Financial Literacy and Responsibility

Model Good Financial Behavior: When you gift assets or funds, you have an opportunity to share the “why” behind the gift and provide financial insights. This can be particularly impactful for younger family members, who gain not only financial resources but also valuable lessons in financial planning and stewardship.

Encourage Long-Term Thinking: Helping loved ones achieve financial goals encourages them to think long-term. Whether it’s saving for a major life event or investing in their future, family gifting can help foster a mindset of responsibility and growth.

Charitable Giving: Making a Difference in Your Community

Gifting to charity allows you to support causes you care about and often brings financial perks that make it a wise part of any financial strategy.

1. Potential Tax Deductions for Qualified Donations

Reduce Taxable Income: Charitable contributions to qualified organizations are typically tax-deductible, reducing your taxable income and potentially lowering your overall tax bill. Check with your tax attorney for more information.

Offset Large Gains: If you’ve had a financially successful year and are facing capital gains, charitable contributions can help offset this. Donating appreciated securities like stocks not only benefits the charity but may also help you avoid capital gains tax on the appreciated value.

2. Align Giving with Your Values

Support Causes that Matter to You: Charitable giving allows you to make a tangible difference for the causes closest to your heart. Whether it’s education, health, environmental protection, or social justice, donations allow you to leave a lasting impact and directly influence the work you believe in.

Create a Legacy of Generosity: By setting up recurring donations or creating a donor-advised fund, you can ensure your support continues over time, even beyond your lifetime. This long-term commitment not only establishes a legacy but can also inspire future generations in your family to uphold similar values.

3. Flexible Giving Options for Different Goals

One-Time Gifts vs. Recurring Donations: Charitable giving is flexible. You can make one-time contributions or establish ongoing support that aligns with your budget. Recurring donations often allow charities to plan better and make long-term commitments to their work.

Use of Donor-Advised Funds: Donor-advised funds (DAFs) offer a tax-advantageous way to manage your charitable giving. By contributing to a DAF, you can claim a tax deduction in the year of the donation while distributing funds to charities of your choice over time, providing you with control and flexibility. Reach out to a Verde Advisor to open this type of account (advisory fees on this type of account do not apply).

Whether you’re supporting your family, contributing to charitable causes, or both, giving is a powerful way to make a meaningful impact. By incorporating these strategies into your financial plan, you can maximize the benefits of gifting while aligning your resources with your values and goals. And in the end, giving not only enriches the lives of those you support but also brings lasting fulfillment and peace of mind for you.