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November 2019 E-Newsletter: Veterans Day Observed

On November 11th it will be Veterans Day – an occasion to honor all those who have served for our country.  

It is a day to thank millions of veterans for their service and their bravery – men and women willing to risk all to protect America.

We thank our nation’s veterans this November 11th.  The service of these Americans has helped make this country extraordinary.


Jonathan M. Gardey, MBA, CFA®, CFP®

 President and CEO

 Gardey Financial Advisors

The Gift Tax Case Study

Provided by Gardey Financial Advisors

Not All Gifts are taxable.

I would like for you to meet my friend, Hugh. He is a retired film stuntman, who, after a long career, is enjoying his retirement. Some of what he is enjoying about his retirement is sharing part of his accumulated wealth with his family, specifically his wife and two sons. Like many Americans, Hugh likes to make sure that when he is sharing that wealth he isn’t giving the I.R.S. any more than is required. 

Hugh knows about the gift tax and he knows how to make those gifts without running into a taxable situation. This is Hugh’s responsibility because the I.R.S. puts the onus on the giver. If the gift is a taxable event and Hugh doesn’t pay up, then the responsibility falls to the beneficiaries after he passes in the form of estate taxes. These rules are in place so that Hugh can’t simply give his entire fortune to his sons before he dies.

Exemptions for family and friends.

It is different for Hugh’s wife, Barbara. The unlimited marital deduction means that gifts given by Hugh to Barbara (or vice versa) never incur the gift tax. There is one exception though: Maybe Barbara is a non-U.S. citizen. If so, there is a limit to what Hugh can give to her, up to $155,000 per year. (This is the limit for 2019; it is tied to inflation.) 1,2

The annual gift limit for non-spouses is $15,000 and it applies to both cash and noncash gifts. So, if Hugh buys his older son, Tony, a $15,000 motorcycle, it is the same as writing a $15,000 check to his younger son, Jerry, or gifting him $15,000 in stock. Spouses have their own separate gift limit as well: Barbara could also write Jerry a $15,000 check from the account she shares with Hugh.1,2 

Education and healthcare.

The gift tax doesn’t apply to specific payments made directly to education or healthcare institutions for the benefit of someone else.  So, if Tony breaks his leg riding that motorcycle, Hugh can write a check to the hospital.  If Jerry goes back to college to become a chiropractor, Hugh can write a tuition check to the college.  This only works if Hugh is writing the check to the institution directly.  If he is writing the check to the beneficiaries (i.e. Tony and Jerry), Hugh might incur the gift tax.1,2

The Lifetime Gift Tax Exemption.

What if Hugh were to go over the limit? The lifetime gift tax exemption would go into effect, and the rest would be reported as part of the lifetime exemption via IRS Tax Form 709 the following April. Unlike the annual exemption, the lifetime exemption is cumulative for Hugh. Currently, that lifetime exemption is $11.4 million.1,2

Hugh is a stuntman and an active extreme sportsman concerned about his estate strategy.  If Hugh was to borrow Tony’s motorcycle and then attempt to jump the Snake River Canyon, what would happen if he didn’t make it across? If that unfortunate event occurred in 2019, and he has given $9 million over his lifetime, and his estate and all of that giving in 2019 totaled more than $2.4 million, the estate may owe a federal tax and possibly a state estate tax on the amount over $11.4 million. Barbara would have her own $11.4 million lifetime exemption, however, and since she is the spouse, estate taxes may not apply.1,2

Any wise stuntman will tell you, “Leave this to the experts.” Talk to a trusted financial professional about your own plans for giving.

 Gardey Financial Advisors may be reached at 989-791-3880 or https://www.gardey.com/    

Important Disclosure Information

Gardey Financial Advisors Disclosure  Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Gardey Financial Advisors (“Gardey”), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Gardey. Please remember to contact Gardey if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Gardey is neither a law firm nor a certified public accounting firm and no portion of the commentary content should be construed as legal or accounting advice.  A copy of Gardey’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.    


1 thebalance.com/gift-tax-exclusion-annual-exclusion-vs-lifetime-exemption-3505656 [2/9/2019]  

2 cstaxtrustestatesblog.com/2018/11/articles/estate-tax/2019-estate-gift-tax-update/ [11/19/2018]