Now or Later: How to Weigh Giving During Life vs. Giving Through Your Will

Admin • April 12, 2024

You’ve worked hard to build wealth and hope to leave a legacy for family or friends after your death. But what if you could see those loved ones benefit from your resources while you are still alive? Let’s explore the possibilities and tax details around gifting your money or assets before you pass away.

The Benefits of Giving

Most of us have been told at some point in our lives that “‘tis better to give than to receive.” In recent decades, several studies have explored what happens in your brain when you give a gift.

In one study , experimenters found that happiness increased more when subjects were instructed to spend money on others than when instructed to spend on themselves. Psychologists have been able to confirm that there is indeed a neurological benefit to giving gifts.

In addition to this neurological boost, one reason you may want to give gifts during your life is to watch the benefit of your gift play out. Once your retirement and medical expenses are provided for, you stand to benefit more emotionally by giving during your lifetime.

Imagine the ability to choose how to apply your gifts. Maybe you want to share a love of travel with a family member and can enable them to take a trip they couldn’t otherwise afford. You’ll be able to hear their stories and see their pictures (or even take the trip with them) and enrich both your life and theirs through your gift.

Or if you are passionate about education, you might be able to ease the burden pursuing a higher degree often brings. Instead of watching your child or grandchild struggle to balance paid work and coursework, you could give them the gift of stability during a time of transition and changing circumstances.

You could also give a gift that funds the start-up costs of a small business or the down payment on a home. In any of these circumstances, the joy is ongoing as you see the effects of your gift play out immediately and as time goes on.

Rules on Gifting Money to Family and Others

If giving during your life appeals to you, you may have wondered how much money can you gift tax-free. Below are some of the restrictions surrounding timing and amounts to help you plan.

Annual Exclusion Amounts: For 2024, the IRS has set the annual exclusion amount for gift taxes at $18,000 , meaning you do not need to report any gifts up to $18,000 for any individual donee.

This rate is from one individual to another, so if you are married, you and your spouse could each gift the same individual $18,000 for a total of $36,000 for that year. If you’re interested in gifting money to adult children or grandchildren, this type of gift allows you to give money without any party having to pay taxes on the gift.

*If you exceed the annual exclusion amount in gifts to a single donee (whether cash or fair market value for assets such as stocks, real estate, or other property), you do need to report the gift to the IRS using Form 709 .

Lifetime Exclusion Amounts: In addition to the annual exclusion amount for gift taxes, you’ll also want to be aware of the lifetime exclusion amount. In 2024, the individual exclusion limit is $13.61 million per individual (again, doubled for married couples). This amount is scheduled to drop back to $5 million after 2025, so plan accordingly.

Unlike the annual gift exclusion, the lifetime exclusion is tied to the donor, not the donee. If you decided to gift two adult children $68,000 each this year, each child would exceed the annual gift exclusion amount by $20,000, bringing your lifetime exclusion amount down to $13.51 million. You will only begin paying taxes on gifts after you have given more than $13.61 million cumulatively over the annual exclusions, including the value of your estate upon your passing. The gift tax rate varies depending on the value of the gift over the exclusion amount.

Exempted Gifts: Another way to support friends and family without running into larger tax bills is to consider giving a gift by directly paying for tuition or medical expenses. The expenses are not counted against your annual exclusion as long as they are paid to the institution directly and not through a transfer to the individual benefiting from the gift.
Giving to Your Spouse: There is no limit to the value each spouse can give each other during any period. These gifts do not need to be reported to the IRS and will not be taxed. This applies to state-recognized marriages but not to those who have a “common law” partnership, domestic partnership, or civil union .

Charitable Giving

Gifts to charities are considered donations under the tax code rather than gifts. They fall into a separate category and may be tax deductible, unlike personal gifts that will not affect your taxable income rates. This is different than donating to political parties, so if you are considering a large gift to an organization, you will want to look into their tax exemption status.

How Lifetime Giving Fits into Estate Planning

As you plan to allocate your estate after your passing, consider the lifetime exclusion limit. This limit sets the cap on both lifetime gifts and inheritance gifts. With the cap set to drop to $5 million in 2026 , savvy investors will take stock of their total assets, including real estate, investment portfolios, and valuable property such as artwork or antiques. If the value of your total estate exceeds $5 million, it might make sense to set up a plan for lifetime giving to bring your estate’s worth under the tax-triggering amount.

These limits are for the IRS and federal taxes, but several states also levy inheritance taxes that you will need to consider. Additionally, it’s important to remember that tax rates change over time. Just because a tax rate is low now doesn’t mean it will always be, and there is no guarantee that annual exemption rates will remain high.

Unlock the Future of Your Legacy with Five Pines Wealth Management

The team at Five Pines Wealth Management believes estate planning is more than just a financial strategy, it’s a powerful tool for shaping your legacy. We’re ready to help guide you through the complexity of gift planning to ensure every gift maximizes your happiness while minimizing your tax burden.

With our expertise in federal and state taxes, we tailor a customized plan that aligns with your unique circumstances. By scheduling a meeting with us, you’re taking the first step toward your future and the future of your loved ones. We can’t wait to connect with you!

The post Now or Later: How to Weigh Giving During Life vs. Giving Through Your Will appeared first on Five Pine Wealth Management.

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Preparing for Retirement Without Compromising Today: Savings Strategies for Your 50s

February 21, 2025

Somewhere in adulthood, the old question of “What do you want to be when you grow up?” morphs into “ What do you want to do when you retire?” Some people dream about their retirement for decades, while others barely give it a thought. Either way, by the time you reach your 50s, you’ll benefit from building a retirement plan that doesn’t force you to sacrifice all of life’s joys today. Retirement planning in your 50s is less about radical changes and more about making intelligent, intentional decisions. Let’s dive in. By your 50s, you’ve likely hit your peak earning years. That’s the good news. The not-so-great news? The clock is ticking on the years left to build your nest egg. Don’t panic. With a strategic approach, you can set yourself up for a secure retirement without feeling like you’re putting life on pause. Your 50s are also a time to reassess priorities. Kids might be leaving the house (goodbye, endless grocery bills!), and you might have more flexibility in allocating your income. This decade is the perfect opportunity to course-correct and make up for any lost time. 4 Retirement Savings Strategies for Your 50s This decade is the perfect time to implement strategies that will help you coast right into your golden years. 1. Max Out Retirement Accounts The IRS gives a little extra love to folks 50 and over in the form of catch-up contributions. For 2024, you can contribute up to $30,500 to your 401(k) ($23,000 plus a $7,500 catch-up contribution). Don’t have a 401(k)? No problem. With an IRA, you can add an extra $1,000 to the usual $7000 contribution limit. These boosts may seem small, but they add up fast, especially with compounding returns working their magic. 2. Automate Your Savings Automating contributions ensures you’re consistently saving without even thinking about it. Set up direct deposits into your retirement accounts so saving becomes as effortless as your morning coffee routine. If you get a raise, consider earmarking most of it for your savings—future you will thank you. 3. Diversify Investments By now, you’ve likely heard that “diversification” is key, but what does it mean for you? In your 50s, you’re likely transitioning from a more aggressive portfolio to a slightly more conservative one. That doesn’t mean selling all your stocks and parking your money in bonds, but rather finding a balance that aligns with your risk tolerance and timeline. 4. Pay Down High-Interest Debt Interest rates on credit cards or other high-interest loans can drain funds that could otherwise be growing in retirement accounts. Paying these off first will free up cash flow for savings. Catching Up on Retirement Savings If you’re behind on retirement savings, don’t stress. There are plenty of ways to catch up while still enjoying life today: Reevaluate Your Budget : Start by taking a close look at where your money is going. Are there subscriptions you’ve forgotten about? Could dining out be scaled back slightly? You don’t have to eliminate all your “wants”—just trim the fat. Even reallocating $200 a month can lead to significant savings over time. Downsize Strategically : Empty nesters, this one’s for you. If your current home has more space than you need, downsizing could free up substantial equity for retirement savings. Smaller homes also mean lower utility bills, maintenance costs, and property taxes. Leverage Catch-Up Contributions : As mentioned earlier, these higher contribution limits for people over 50 are a game-changer. Pair this with any employer-matching contributions, and you’ve got a recipe for rapid savings growth. Delay Social Security : While Social Security might feel like a safety net, waiting to claim it can significantly increase your benefits. Your benefits grow every year you delay claiming beyond your full retirement age (up to 70). If you can, let those checks wait while your investments continue to work. Explore Additional Income Streams : Retirement doesn’t have to mean quitting work entirely. Many people in their 50s find side hustles or part-time work that aligns with their interests. Whether it’s consulting, teaching, or turning a hobby into income, these earnings can supplement savings without feeling like a burden. Balancing Retirement Planning with Enjoying Today Now for the part everyone cares about: How do you plan for tomorrow without ruining today? Here’s how to strike the balance: Set Clear Goals What does retirement look like for you? Is it traveling the world, spending more time with family, or pursuing hobbies you love? Knowing your “why” helps make the sacrifices feel worthwhile. It also gives you a clearer target to aim for. Embrace Experiences Over Things Research shows that spending on experiences—like vacations, concerts, or classes—provides longer-lasting happiness than material goods. Plus, experiences don’t have to break the bank. Look for ways to create memories without overspending. Plan for Mini-Retirements Who says you have to wait until you’re 65 to enjoy some of that freedom? Consider taking shorter breaks or extended vacations now to recharge and enjoy life. With careful planning, these “mini-retirements” won’t derail your long-term goals. Prioritize Health One of the best investments you can make in your future is in your health. Regular exercise, a balanced diet, and preventive healthcare can reduce medical expenses down the road and ensure you can fully enjoy your retirement. Celebrate Small Wins Saving for retirement is a marathon, not a sprint. Celebrate progress along the way—whether it’s maxing out your 401(k) for the first time or finally paying off that lingering debt. 3 Practical Action Steps to Get Started Calculate Your Retirement Needs : Estimate how much you’ll need to maintain your desired lifestyle. Don’t forget to factor in healthcare costs, home maintenance, inflation, and leisure activities. Review Insurance Coverage : Make sure you’re adequately covered with health, life, and long-term care insurance. These policies can protect your savings from unexpected expenses. Adjust Your Asset Allocation : As you approach retirement, consider shifting some of your investments into more stable options. This will minimize the risk of major losses as you approach the time when you will need the money. How Five Pine Wealth Management Can Help We can help you create a tailored plan, taking into account your current savings, goals, and timeline. With our experience, we can advise you on maximizing tax-advantaged accounts and minimizing unnecessary risks. Preparing for retirement in your 50s doesn’t mean sacrificing today’s joys. With thoughtful planning, strategic savings, and a focus on balance, you can enjoy the present while setting yourself up for a comfortable future. Start today, by scheduling a meeting with us. Email info@fivepinewealth.com or call us at: 877.333.1015 to take it one step at a time, and remember: It’s never too late to build the retirement you deserve.

Robo Advisor vs Financial Advisor: Why Automation Can’t Beat the Human Touch

February 14, 2025

In today's fast-paced and tech-driven world, convenience is a hot commodity. Businesses across industries have had to pivot to meet the demands of consumers who crave efficiency and ease. Think about how brick-and-mortar retailers have transformed into online shopping havens with a greatly increased selection of products, the ease of shopping at all hours from home, or how delivery services have boomed as an effortless solution to mealtime dilemmas, to name a few. If businesses don't prioritize easy accessibility and simplicity, many risk losing consumers. The finance industry is no exception — in fact, it's a prime example of an industry constantly innovating to simplify highly sought-after services like investing. Case in point? Robo-advisors. What Is a Robo-Advisor? If you're unfamiliar with the term, you could likely guess its meaning from the name alone. More officially, it refers to a software application that provides automated, algorithm-driven investment management with minimal human intervention. These platforms leverage technology to streamline and optimize the investment process. They typically offer a curated selection of investment options tailored to an investor's goals, risk tolerance, and time horizon. An automated solution for building wealth? Sounds promising! But while it might seem like an all-good, no-bad, very-welcomed shift in the industry, it's important to remember that with the positives may come some serious drawbacks. Let's explore both sides: robo advisor pros and cons. Robo-Advisor Pros First off, let's highlight the positives. A big one is that many individuals who had never even considered investing before might still be in the same position today if it weren't for accessible solutions like robo-advisors. They have opened doors for countless people to enter the world of investing, which is exciting! But let's look at a few other benefits that have fueled their increasing popularity: Accessibility and Convenience: These are two key factors that influence consumer satisfaction, and robo-advisors deliver precisely that. They are easily accessible online or through mobile apps. Their user-friendly interfaces make it easy for investors to open an account and set up automated contributions within minutes, monitor their investments, and make adjustments — all without the need for face-to-face meetings or phone calls with a financial advisor. Automatic Diversification: If you're new to investing or have limited knowledge, robo-advisors alleviate the stress of deciding how to invest. Using sophisticated algorithms, they offer diversified investment portfolios based on your risk tolerance, investment goals, and how soon you may need to access your invested money. This approach can effectively mitigate risk and minimize the impact of market volatility on investment returns. Low Cost: Robo-advisors usually come with lower fees than traditional financial advisors who actively manage your portfolio. Through automation and technology, these platforms can offer their services at a lower cost, making investment management more accessible to a broader range of investors, including those with smaller portfolios. These benefits are precisely what many investors are seeking as they begin their investing journey, positioning robo-advisors as a solution for some. Robo-Advisor Cons While robo-advisors have gained popularity for their evident and understandable benefits, it's essential to acknowledge that every innovation or advancement often has accompanying drawbacks. Let's explore some of them: No Human Touch: Finances are deeply personal. Beyond mere math, financial decisions are often emotionally driven. While a robo-advisor can efficiently manage your investments using algorithms and automation, it can't engage in comforting conversations or provide reassurance during turbulent market conditions to prevent impulse decisions driven by fear or uncertainty. Nor can it offer encouragement to keep going or remind you of your progress in your financial journey when times get tough. Sometimes, human interaction and guidance are indispensable. Limited Customization: Robo-advisors typically offer a selection of pre-built portfolios made up of ETFs (exchange-traded funds) or mutual funds. While these portfolios provide diversification that suits many investors, they're not a perfect fit for everyone. Take, for example, an investor with specific preferences, like avoiding certain companies or industries or desiring to invest in individual stocks. In such cases, robo-advisors might be too restrictive. Additionally, robo-advisors might not have the capacity to deal with more complex financial situations, such as tax optimization or retirement income planning for high-net-worth individuals. Limited Area of Focus: While the allure of robo-advisors partially lies in their simplicity, that can equally be a drawback. Because robo-advisors primarily focus on investment management, you might miss out on the holistic approach of a human financial advisor who considers various aspects of your financial situation. A robo-advisor doesn't consider factors like high-interest debt you may have, for example, which might be wiser to pay down before aggressively investing. Nor does it account for the possibility of not having an adequate emergency fund or other pressing financial obligations that take priority. When it comes to investing, having a financial advisor looking at your entire financial landscape can provide valuable insights into the most suitable account types to open, ideal contribution amounts, and the target rate of return to aim for. These drawbacks highlight the importance of understanding the limitations of a robo advisor vs. a financial advisor and considering them in the context of your financial goals, preferences, and circumstances. Robo Advisors vs. Financial Advisors: How Five Pine Wealth Management Can Add a Personal Touch to Your Finances The balance between the positive and negative aspects is a common challenge of many new technologies, robo-advisors included. As with any financial decision, investors should thoughtfully evaluate their individual needs and preferences before opting for these platforms. As you might be able to guess, we here at Five Pine Wealth Management place immense value on the personal touch and genuine passion of a human financial advisor. It's the driving force behind everything we do. We believe in understanding your circumstances, empathizing with your concerns, building a long-lasting relationship, and providing personalized guidance for each client. While we can recognize the advantages of robo-advisors, we can't ignore the fact that they can't replicate the human element in financial planning. The relationship with a financial advisor goes beyond mere numbers. And if that's what you're looking for, we'd love to chat! Contact us at info@fivepinewealth.com or 877.333.1015 to schedule a meeting.