Just a few days before Christmas, Marianne was bustling to finish her holiday shopping. As she pulled into the mall parking lot, her mind raced through her checklist: a video game for her grandson, a photo frame for Aunt Sue, and a crystal vase for her daughter-in-law. Entering her favorite department store, she paused, captivated by a towering Christmas tree glittering with tinsel.
As she approached, Marianne noticed the tree was adorned not just with decorations, but with colorful paper ornaments. Each ornament bore the name of a child along with a simple gift request. Marianne couldn’t resist. One by one, she carefully chose ornaments: Emily, Matthew, Isabelle, Nathan. Smiling warmly, she set out to shop for these children, finding joy in the spirit of giving.
The holiday season is a time of abundant generosity. Each year, Americans spend billions on gifts for loved ones. In fact, recent studies show the average shopper spends hundreds—if not more—on presents for family, friends, and coworkers. Beyond personal giving, the holidays also inspire many to contribute to charitable causes. Programs like Toys for Tots, for instance, have brought joy to millions of children, thanks to donors who embrace the season of giving.
Charitable Giving and Tax Benefits
For those who wish to make a difference while also maximizing tax benefits, charitable contributions to qualified 501(c)(3) organizations are a great option. Donations made before year-end are often eligible for income tax deductions, provided proper documentation is in place. For cash contributions, donors need either a bank record reflecting the gift or a written acknowledgment from the charity that includes the organization’s name, date of the contribution, and the amount donated. Non-cash contributions require a receipt or similar written documentation from the charity.
Giving as Part of Estate Planning
Generosity can also be an essential part of estate planning. Individuals with taxable estates may find gifting to be a powerful strategy to reduce estate tax liabilities. For 2024, the annual gift tax exclusion allows individuals to gift up to $17,000 per person tax-free, or $34,000 per recipient if the giver is married. By gifting strategically, you can transfer wealth while potentially reducing your taxable estate.
For those with a passion for philanthropy, establishing a Charitable Remainder Trust (CRT) or Charitable Lead Trust (CLT) can offer even greater tax advantages while supporting the causes you care about. A CRT allows you to receive income from the trust for a period of time, with the remaining assets eventually going to a named charity. In contrast, a CLT provides income to the charity for a set term, after which the remaining assets pass to non-charitable beneficiaries. These tools require careful planning, so consulting an experienced estate planning attorney is essential.
Embrace the Holiday Spirit with Purpose
The holidays are a time for reflection, gratitude, and generosity. Whether you’re picking out gifts for loved ones or planning a meaningful charitable donation, there are countless ways to give back while aligning your actions with your financial and estate planning goals.
An estate planning attorney can help you explore options that maximize the impact of your gifts while minimizing tax burdens. This holiday season, let the spirit of giving guide you—not only in spreading joy but in creating a lasting legacy of generosity.