MAGAZINE - USAA

on the money
Smart solutions
From the pitfalls of payday loans to
easing estate tax burdens, USAA
answers your questions
My 84-year-old mother has $250,000
in stock and mutual funds. Now she
wants to start giving me and her
grandchildren cash gifts by liquidating
her investments. Should she just cash
in/sell her investments and give the
gifts, $12,000 per person, per year, to
each of us? — Michael, Mechanicsburg, Pa.
As you mention, your mom can
give you and your kids up to
$12,000 each, per calendar year,
without taxes, or gift tax implications,
according to the IRS. But keep in mind
that her gifts don’t have to be in cash.
“Seniors who are trying to reduce the size of
their estates often implement a gifting strategy,”
says J.J. Montanaro, a Ce r t i f i e d Fin a n c i a l Pl a n n e r tm
practitioner with USAA. “If they sell the appreciated
assets and give cash gifts it might benefit all
parties.” The recipients would receive a gift without
any capital-gains implications, and the givers
would further reduce the size of their estates by
paying the capital-gains tax. “When you make
lifetime gifts of stock, land or other securities, you
don’t pay capital gains tax. But when the recipients
sell such assets, they will pay tax on the
difference between what they sell them for and
what you originally paid,” says Montanaro.
Your mom is a great example of how smart
investing can contribute to a comfortable
retirement and help create financial security for
future generations. Making sure her money goes as
far as possible can be tricky business, however. So
consult a tax advisor if you have further questions.
I have an adjustable-rate
mortgage with 12 months
left at my current rate.
Should I refinance now?
— Ronald, Faye, N.C.
As of this writing, interest rates
are still well below average, and
there’s no guarantee they’ll drop
again soon. So as long as you’re
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usaa magazine winter 2008 usaa.com