Making Cents: Gifts that keep on giving for those you love most
By: John P. Napolitano, CFP®, CPA, PFS, MST
Many folks have begun making progress with their year-end and holiday gifting. Just in case you’re typically one of those last minute shoppers with no idea what to get for your closest family members, consider helping them get some financial things done that are frequently unattended.
For young children, consider a 529 college savings plan. Most plans allow for small initial contributions. In some states, you may even qualify for a state income tax deduction for a portion of that contribution. Prior to investing in a 529 Plan investors should consider whether the investor's or beneficiary's home state offers other state benefits such as financial aid, scholarships, and protection from creditors that are only available for investments in such state's qualified tuition program.
For college aged kids, consider paying some of their college bills directly. Checks made payable to the institution for tuition and fees do not count against the annual gift tax exclusion of $15,000 per donor.
For recent college graduates, this could be a good time to be sure that they’ve got their adult financial mind working properly. Help them understand their benefits at work. If there’s a 401K, and your young adult isn’t able to afford contributions due to their new high cost of living, consider posing an incentive. For every dollar invested in a 401K, consider a matching gift so they can afford their lifestyle while on entry level salary. This allows them to witness the power of saving and tax deferred compound growth.
For young families, the range of options expands significantly. The first is a gift of professional services. Expert services needed by most young families are an attorney and financial guidance. For fairly simple situations, ensure that the young family has wills and trusts– especially if there are young children.
Families with young children need to be sure that they have wills for more than property. It’s the will where one appoints a successor guardian for minor children. Ignoring this could mean a battle amongst family members regarding who becomes the orphaned children’s new ‘parents’.
The trust is significant in that it may thwart minor children from having access to too much money too fast in life. While perhaps unlikely that both parents pass while the children are fairly young the result could be horrible if you lack proper structure. This isn’t only for wealthy families, it can apply to anyone with a home, savings and life insurance. Do you think that $1million in life insurance proceeds received directly by a 21 year old may be the instigator of future bad decisions? Sadly, you know the answer.
One inexpensive gift that may keep on giving is to be sure that the young family has suitable life insurance. For young, healthy adults it’s most important that the need is calculated sans rose colored glasses and that the calculated need is covered. For most young families, the cost of term life insurance will be a lot less than the cost for you to assist financially after a catastrophic event.
John P. Napolitano CFP®, CPA is CEO of US Wealth Management in Braintree, MA. Visit JohnPNapolitano on LinkedIn or uswealthnapolitano.com. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.