Timing of annual gift: Jan. vs Dec.

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WBC
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Timing of annual gift: Jan. vs Dec.

Post by WBC »

What are the considerations for the calendar-year timing of annual gifts? Specifically $15k-per-individual gifts to children.

Reasons to give in January:
- Gains and dividends accrue to gift recipient, effectively increasing the size of the gift (assuming markets go up).
- ??

Reasons to give in December:
- ??

Any other considerations or thoughts in this regard would be appreciated. Thanks.
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Stinky
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Re: Timing of annual gift: Jan. vs Dec.

Post by Stinky »

January - paying off Christmas credit card bills?
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walkabout
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Re: Timing of annual gift: Jan. vs Dec.

Post by walkabout »

Giving in December AND giving in January means you can effectively give double the amount without having to file any tax forms. Of course, after giving in January, you can’t give anything for the rest of that year without declaring it, so you would only be able to bunch gifts like this every other year. However, if you felt like a larger gift would be useful occasionally, bunching like this might be a good idea.
ohai
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Re: Timing of annual gift: Jan. vs Dec.

Post by ohai »

Earlier is better if you want to maximize the gift amount, since any expected appreciation will not be in the gift, compared to December when the gifted amount will be after appreciation. Let's say investment return is 10% a year. You will be able to give almost 10% more overall, assuming everyone invests in the same thing.
shess
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Re: Timing of annual gift: Jan. vs Dec.

Post by shess »

Giving in January means you got it done and won't have to worry about last-minute issues.
its4inthemorning
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Re: Timing of annual gift: Jan. vs Dec.

Post by its4inthemorning »

If you are gifting appreciated securities, gifting in January gives the donees a lot of time to decide if and when they want to sell a holding that tax year.
venkman
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Re: Timing of annual gift: Jan. vs Dec.

Post by venkman »

If you max it out in January, there's no margin left for anything unexpected that might come up during the year (e.g. a faraway relative dies and you want to pay for the plane tickets to go the funeral). On the other hand, the cumulative amount for that sort of thing will almost certainly be trivial, in light of the $5 million lifetime gift tax exemption...
Dandy
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Re: Timing of annual gift: Jan. vs Dec.

Post by Dandy »

We gift to our adult children in January -- that is when I take my full RMD. There is a limit of $15k per year per individual or else you have to file a special form. The gift year I believe is determined by the date the gift is deposited by the "giftee". So if they deposit a December 2020 gift check in 2021 it counts as a 2021 gift. So, while it is nice to give the gift as a Christmas/Holiday present it can mess up the yearly gifting limit if they deposit 2 gifts in the same year.

So, we choose January to give our gifts.
shess
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Re: Timing of annual gift: Jan. vs Dec.

Post by shess »

venkman wrote: Fri Jan 10, 2020 11:58 pm If you max it out in January, there's no margin left for anything unexpected that might come up during the year (e.g. a faraway relative dies and you want to pay for the plane tickets to go the funeral). On the other hand, the cumulative amount for that sort of thing will almost certainly be trivial, in light of the $5 million lifetime gift tax exemption...
If a faraway relative dies I'd just buy the plane tickets for them and not even consider whether gift taxes apply. I don't mean that I'd purposely evade the spirit of the regulation, I mean that it probably wouldn't even occur to me that this is a gift-tax issue in the first place. Unless I was doing this every year or something, the IRS would likely never consider it a problem, either.
michaeljc70
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Re: Timing of annual gift: Jan. vs Dec.

Post by michaeljc70 »

My parents give it as a holiday gift to the kids for Xmas (along with some smaller items). That makes sense to me. If you don't celebrate the holidays then I guess it doesn't matter. I'll take and appreciate a cash gift any month of the year :D.
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TomatoTomahto
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Re: Timing of annual gift: Jan. vs Dec.

Post by TomatoTomahto »

We don’t think about the timing too much while DW is employed. Gifting around the time of her annual bonus is convenient; do the gift and send the remainder to Vanguard.
I get the FI part but not the RE part of FIRE.
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