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When you make gifts, everyone wins 

Provided by RBC Wealth Management
and Dave Dupont

If you want to make financial gifts to family members or charitable organizations, you get at least two major benefits. First, you get the good feelings that result from helping your family or those groups you support. And second, you can get some nice tax advantages — which makes it easier for you to keep giving.

Most gifts fall into one of three categories:

• Personal gifts for any purpose — For 2014, you can give up to $14,000 per year to as many people as you like, without incurring gift taxes. And this limit applies to individuals, not to households.

Personal gifts for college — If you want to help pay for your child’s or grandchild’s college education, you can contribute to some attractive funding vehicles, such as a Section 529 college investment plan. Your 529 plan contributions will lower your taxable estate, but you’ll still retain control of the assets, right up to the time the beneficiary uses the money for college. Additionally, withdrawals from Section 529 plans are tax free, provided they’re used to pay for qualified educational costs. Separate from a 529 plan, you may also help cover someone’s educational expenses by paying his or her tuition to a qualifying institution, which can include primary and secondary schools as well as post-secondary schools. This can be in addition to the $14,000 personal gift to that individual. Keep in mind that you have to pay the institution directly.

• Charitable gifts — By making a gift to a charitable organization, you actually get several different types of tax benefits. First, you may get an immediate tax deduction for your gift. Second, you’ll avoid paying capital gains taxes by donating appreciated assets, such as stock or real estate. And third, you’ll be removing an asset from your taxable estate. Depending on how you structure your charitable gift, you may be able to benefit in other ways. For example, if you establish what’s known as a Charitable Remainder Trust, you donate an asset to a trust, which then sells it and invests the proceeds in an income-producing vehicle. You then receive a lifetime income stream and when you die, the trust disperses the remaining funds to the charitable organization you chose.

This article is provided by Dave Dupont, a Financial Advisor at RBC Wealth Management. RBC Wealth Management does not endorse this organization or publication.

RBC Wealth Management, a division of RBC Capital Markets LLC, Member NYSE/FINRA/SIPC

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