Some people are all about finding the perfect gift, and others have come around to the idea that all of us have more than enough stuff. For some, a thoughtful gift to loved ones may be a sum of money, something that allows them to buy what they need instead of torturing them with a new sweater. And for large sums, there can be tax repercussions. So is it a good idea to give money as a gift? And what's the best way to do it? Here are few things to consider.
Pros and cons:
It's never been easier to send or give money, but that doesn't mean it's always the best idea. Just as you would with any other gift, consider whether it makes sense for the recipient. Giving money might be a great idea for a niece you don't know that well, but not such a great idea for your spouse. Pros of giving money are: it's easy; you don't have to worry about getting the wrong thing; and it can be more equitable, for example, if you want to give a similar gift to multiple people. Cons are that giving money can seem impersonal; can easily be lost or, in the case of gift cards or certificates, unused; and it's not quite as fun to watch somebody rip open a gift card from underneath the holiday tree.
Ways to give:
Venmo, Google Wallet, PayPal, Square Cash and Apple Pay are all electronic services that will allow you send money to friends and family quickly and securely, right from your phone or laptop. As long as you're not using a credit card, many of these services offer free transfers.
Gift & prepaid cards:
Nowadays it's easy to find a huge variety of gift cards for popular chain retailers right at the grocery store. These are a great way to give a gift that's somewhat personal, without purchasing something specific that the recipient might not like. In addition, if you keep track of the card's serial number or include the receipt, a gift card can be safer than just giving cash (if it's lost or stolen, you may be able to recover it). A tip: Be sure the person you're buying for actually shops at that store or online retailer, and that it's available in their area.
Prepaid cards can also be a little more secure than cash, and there's no restriction on where your giftee can use the funds. Just be sure to buy an FDIC insured card from a well-liked provider that doesn't charge unnecessary fees. (WalMart's popular Bluebird card is a great option.)
Understanding gift tax:
It's unlikely that even the most generous holiday gift will invoke the gift tax, but if you plan to give a larger sum of money, it's possible. In general, the gift tax applies to gifts over $14,000 per individual. That means if you gave $10,000 to two different people, you still wouldn't have to pay the gift tax. If you're considering gifting such a substantial sum, you should probably consult your accountant or financial advisor.
For any insurance questions, call or contact Wilson, Timmons & Wallerstein, Inc. today.