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In some ways, money is the perfect gift. It’s liquid, which means the recipient has total agency to do whatever they want with it. Cash is the easiest way to give money, and no one’s going to be mad about getting a box full of twenties for their birthday—but unless you’re Robert Deniro in a Scorsese film, giving cash is a bit basic. There’s a real “I don’t care enough to actually buy something” vibe to it, and the unavoidable possibility that you completely forgot to get a gift and literally pulled your wallet out as you walked up to the door. In other words, cash is appreciated but it’s also a low-effort gift.
There are ways to combine at least some of the benefits of giving people money with a slightly more curated feel and more intentional experience, however. With just a bit more planning and effort, you can bask in all the glory of making it rain on friends and family without the lingering suspicion that you’re secretly a drug lord using your loved ones to launder the Walter White levels of cash you have stacked up in a storage space somewhere. If you’re planning to give someone money this holiday season, here are a few suggestions for upgrading the experience.
Gifting money to kids
If your giftee is a child, you know that any cash they get is going to be blown on V-Bucks and PokéCoins. Here are a few ways to give kids money that they will thank you for later:
A savings bond
An old-school savings bond is a great way to give a young person cash (anywhere from $25 to $10,000) with the benefit of earning interest and a little education about how money works. It’s legal for minors to own savings bonds, and they earn interest for up to 30 years after purchase (you can cash them in after 12 months, but you might forfeit some interest if you do it too soon). The days of buying one at your local bank are over—you can only purchase them through the U.S. Treasury Department’s website at www.treasurydirect.gov. Your recipient will need an account there to receive the gift, but you can purchase the bond, print out the certificate, and hold it for them until they do so.
529 account
Setting up or contributing to a 529 plan is a great way to give a kid money that is specifically earmarked for their future education. You can set up a 529 for anyone, and although the money you deposit is post-tax, the account will earn interest tax-free—and it won’t hurt their chances at getting financial aid when the time comes because the asset is technically owned by the custodian of the account. Considering how expensive college is, and how devastating student loans can be, this is an awesome gift.
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Child’s retirement account
Most people are unaware that you can contribute to an Individual Retirement Account (IRA) at any age, as long as you have earned income. The IRA has to be set up as a “custodial” account with a parent or guardian in charge, and you have the same choice between a traditional or Roth IRA (paying taxes on withdrawal with a traditional IRA and paying taxes on deposits with a Roth), as you do with adult accounts. But if you consider that retirement experts always stress that it’s never too early to start saving for retirement, dumping some cash into an IRA for the children in your life is a terrific gift.
UTMA account
Under the Uniform Transfers to Minors Act (UTMA), you can open a custodial account in the name of a child and set parameters for their access to the cash. The child will own the assets in the account, and the gift is irrevocable. You can decide whether they can access the cash when they attain the age of majority in your state (typically 18 or 21) or later, and you run the show until then, making all investment decisions. Once the recipient takes over the account, however, it’s theirs to do with as they please—and because they own the asset, it will count against any financial aid applications they make for college. That makes a 529 account a much better option if you want to help them pay for college.
Trust fund
You might think of trusts as something only very wealthy folks get to set up, but anyone can set up a trust. A trust just sets aside certain assets—which can be anything from cash to property—to benefit an individual or a group. A “living” trust just means the grantor—which would be you—is alive. The great thing about a trust is that it’s incredibly flexible—you can set up almost any rule you like regarding access to the assets, and you can even structure it as an “incentive trust” that pays out only if your giftee does certain things, such as graduate from college. On the other hand, trusts are fairly complex and expensive to maintain and could be seen as controlling and manipulative if you set up too many rules.
For Adults
If your recipient is a fellow grown-up, we’ve got other ways for you to gift cash in non-dollar form. They are:
Gift cards
Look, they’re not sexy, but a gift card is just as good as cash in most situations, and it shows a little more thought and planning than a bunch of sweaty, wrinkled bills stuffed into someone’s hands. You can find them for sale just about everywhere, and they offer a host of security benefits, as well. You can even personalize them at sites like www.giftcards.com, choosing a design or even adding a personal photo.
Certificates of Deposit (CD)
Some folks recommend CDs as gifts for kids because they’re a good way to teach them about interest and the value of saving. But the interest they earn is taxable, making them a bit of a headache for kids. For adults, on the other hand, a CD is a great gift because it’s two gifts in one—the amount you deposit when you set it up for them, and the interest they get when the CD matures.
Stocks
Giving someone stock in a company is better than giving them cash because you’re giving them ownership of something valuable that will hopefully increase in value. And while you can simply shift some of your own shares (from a mutual fund, for example), you can also purchase bespoke shares at a site like Give a Share for a more personal touch. Keep in mind that depending on the stocks you’re gifting, your recipient may have some tax liability on capital gains, so consult a financial advisor before making your move.
Cryptocurrency
Want to be cutting edge? Enjoy saying the word “crypto”? Giving cryptocurrency as a gift is both more exciting than traditional cash and potentially more lucrative (though it’s important to remember that cryptocurrency is the very definition of a volatile investment). It’s also easier than you think if you stick with the well-established mainstream coin exchanges like Coinbase. The easiest way to give crypto is to send your target a gift card, which can then be redeemed when the recipient sets up a wallet. There are no taxes involved when giving crypto, but remind your giftee that there will be taxes when and if they cash out.
Gold
Want to make an impression while pretending you’re some sort of Bond villain? Giving your giftee gold offers some real kick-butt cool factor while also offering real value. Gold is regarded as a safe investment because its value is stable and it tends to appreciate even when the economy is in shambles. Plus, unlike other monetary gifts, it’s a tangible, beautiful physical object. While gold coins (which you can purchase at a reputable dealer like JM Bullion) are popular because they’re an attractive object, you’ll pay a premium for them because they’re regarded as collectibles. Gold bars still have plenty of wow factor without the unnecessary cost.
Charitable donation
Giving money isn’t always about a direct transfer—sometimes it can be about taking on the recipient’s cash outlay. Making a donation to a meaningful charity in the name of your giftee is extremely personal, and it relieves them of making that donation themselves, freeing up their cash for other things. So you accomplish your goal of increasing your loved one’s cash flow while also benefiting the world and making them feel good. It’s a win-win-win.
People are fond of saying that money can’t solve your problems, but the fact is almost every problem we have in our lives could be very effectively solved with the application of some money. Just keep in mind that if you’re planning to be really generous with your giving there are limits to how much cash you can give without worrying about taxes. Choose the right format for your monetary gift and be prepared for some pretty lavish thank-yous.
from Lifehacker https://ift.tt/31fL8qO
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