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Consider financial gifts to family
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At this time of year, you may be thinking about finding the “perfect” gifts for various family members. You can find any number of thoughtful presents, but if you’d like to give something that can have an impact long after the holiday season is over, consider making a financial gift.
You could, of course, just write a check. But you may be able to do more for your intended recipients by finding a more creative gift. Here are a few possibilities:
• Stocks: Many people have preferences for products made by certain companies — and they may well enjoy owning the stocks of those firms. Why not surprise your family members with a few shares of these stocks? If you decide to give shares from your own portfolio, you’ll need to know what you originally paid for the stock, how long you’ve held it and its fair market value at the date of the gift. Recipients of your gift will need this information to determine gains or losses if they decide to sell the stock. You’ll also need to determine if you have to pay gift taxes. You can give up to $12,000 per year, free of gift taxes, to as many people as you want; over your lifetime, you can give up to $1 million without incurring gift taxes.
• Contributions to Section 529 plans: During the past several years, college tuition costs have increased significantly. If you have a child (or grandchild) who will be headed off to college in a few years, you may want to open a Section 529 college savings plan. The contribution limits are typically quite high for this type of account, and your contributions may be tax-deductible if you are participating in your own state’s plan. Plus, your earnings and withdrawals will be exempt from federal taxes as long as the money goes toward paying qualified higher education expenses. (However, withdrawals used for any other expenses may be subject to federal, state and penalty taxes.)
• Contributions to an IRA: Many people don’t fully fund their IRA each year — so any help you can give toward that goal will be important. While you can’t contribute directly to someone else’s IRA, you can write a check to the recipient for that purpose. For the 2008 tax year, the IRA contribution limit is $5,000 ($6,000 for investors who are 50 or older). And the deadline for making contributions for 2008 isn’t until April 15, 2009.
• Charitable gifts: You may want to make a financial gift to a charitable organization in the name of a loved one. If this person supports the work done by the charitable group, he or she will greatly appreciate your thoughtfulness. Furthermore, you’ll get an immediate tax deduction for your gift, as long as the group has received 501(c)(3) tax-exempt status.
By making any of these gifts, you’ll brighten your family members’ holidays — and you’ll know that your generosity truly had an impact on their lives.

Cardella is a financial advisor with Edward Jones in Hinesville.

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