Financial guru Jeff Roberts talks about the financial benefits of the “gift of giving”

Birmingham, Alabama-based financial guru Jeff Roberts, who was recently named one of the top private wealth advisors in the nation by Barron’s®, came on Yellowhammer Radio to lay out the facts so people can decide for themselves.

The full conversation with Mr. Roberts can be heard on the Yellowhammer Radio podcast or in the video above, and a lightly edited transcript of his interview with Yellowhammer’s Scott Beason can be read below.

Subscribe to the Yellowhammer Radio Podcast on iTunes. Learn more about Jeff Roberts’ private wealth advisory practice at JeffRobertsAndAssociates.com.

Jeff:

Today we’re going to talk about, it starts with 5 general uses of money. And if you break it down there’s really five things that we can use money for. We can use money for saving and investing, which of course being the financial guy I kind of like that a lot.

Scott:

I would think you would be partial to that.

Jeff:

I’m pro-investing and there’s no doubt about it. and then we can use money to pay on debt. Folks that’s still have debt payments wether it’s on a mortgage or a car or something you can use money to do that. You can use money to pay taxes and then you can use money for lifestyle. Which lifestyle is the entertainment, dining, travel, committed expenses, discretionary things, a Wal-Mart visits. And then lastly, the fifth use of money is giving it. You can literally give it away. We can basically save and invest, pay debt, pay taxes, use it for our lifestyle or give it away. That’s it. If you really break it down that’s the 5 things that you can do with money.

Scott:

See, I’m big on lifestyle which means I spend it.

Jeff:

As an advisor that’s where we spend a lot of our time trying to coach clients away from the lifestyle issues or at least capping it to some point so they can plan for their financial future.

Scott:

I would figure that would be a big challenge.

Jeff:

Then there’s clients as well that are in a situation where they’re blessed to able to recognize I’m in a position to be able to give. We talked a little bit about this a couple sessions ago and I wanted to focus on it today. Being the holidays, the christmas season, the time of giving gifts, gifting is a good thing to be discussing. The first thing that’s important that we like to talk with clients about when it comes to gifting is planning and again, you’re going to hear me say this over and over when we have these discussions but financial planning is the key. Because, just imagine if you were somebody let’s say you’re pre-retirement or in retirement and you had a desire to maybe gift some dollars to some family members or a charitable organization. One of the things that’s important for you to know is can I do that and it not significantly impact the standard of living or the lifestyle that you’re wanting to maintain in retirement. That’s what we hear from clients all the time, “Well I’d love to give the money away just don’t know if I can afford to.” A good comprehensive retirement plan can help people forecast out the math. Let me give you an example, so we’re working with these people recently. They have substantial assets and they felt as though they wanted to give some away but like many people were concerned about giving it away and needing it at some point down the road. So we did some forecasting and we said, let’s assume that we carve some money out of your nest egg that we’re using in our calculations. Whether it’s $10,000, $50,000, $100,000, $1,000,000, whatever, carve that amount of money out of the analysis. Forecast your retirement for the next 30 years into the future, assuming inflation and everything else and if the math still works and you still look good down the road then that proves that there’s some money that you have today that’s not necessarily needed. And you can afford to give it away. The nice thing about giving and this obviously varies per person but hopefully most people get a joy out of giving to others. And with these particular people I was working with they really wanted to see the benefit of gifting some of those dollars to family members while they’re alive and see the economic impact in their lives while they’re alive to see it and it can benefit their children and grandchildren the most.

Scott:

That does make some sense. I know of a person who if they had visited you they would have been a lot more at peace in their retirement years. And this person is still alive but this person was so worried every day that they would outlive their retirement and they didn’t understand the projections, and they would not do things that they really really wanted to do because they didn’t have that peace of mind comes from talking to you about it. Whether it was gifting or any other thing that they might use their money for, they were just kind of trapped by it. And now we’re a couple of decades into that and they could have done all of these things that you’re talking about but they didn’t have someone like you to walk them through it.

Jeff:

These particular people that kind of got me thinking about this subject that I’m about to share with the audience, they’re in a position where they could gift dollars to their family members. And you’re allowed to gift per year $14,000 per person, per year. So for example, let’s say I decided that I wanted to give my nephew $14,000, I can give my nephew $14,000. And if I had a niece I could also give that niece $14,000 and I could give $14,000 to as many people as I want to. Now, I’m not married but if I was I would be able to give my spouse an unlimited amount of money in any given year. I can give my spouse $1,000,000 and my spouse can give me $1,000,000.

Scott:

I thought they just came with the program? I didn’t understand there was a rule about it. I thought you just gave them all of your money?

Jeff:

You’re allowed to give your spouse as much as you want but if you’re going to give children, grandchildren, nieces, nephews, friends, relatives, family members, brothers, sisters you’re limited to $14,000 per person without any type of gift tax. Now, here’s the interesting thing. I can gift my say nephew $14,000 and if I was married and we didn’t have kids my wife can give that same nephew $14,000 as well. So each person can give another person $14,000. Between my wife and I we can give away $28,000 to one person between the two of us. And we can do that all the way up to January 1st or December 31st and then January 1st into next year we can gift again, so every year you’re allowed to give those gifts. It’s a great time this year where people make gifts to other individuals in their family that they love and want to see benefit and they can turn right back around and do it again January 1st. That’s one idea and of course charitable giving as well which is tremendous because if you give dollars not only do you benefit the organization but you can have a tax deduction for yourself. And as we talked about in a previous sessions we recommend people consider gifting highly appreciated assets. Like if you have a stock that’s appreciated in value, if you cash it in you’re going to have to pay capital gains taxes. Give those appreciated shares of stock to a charitable organization and they can sell it without any capital gains at all. Here’s another neat strategy before we wrap up due to time today. There’s a concept called a donor advised fund which can be used when somebody has money that they want to gift out. Like say somebody in the audience gift away a substantial amount of money this year in 2016 before the end of the year for tax purposes but they don’t know who they want to give it to yet. They don’t have the particular charity worked out, they just know they have $100,000 they want to give away. Well, you can contribute to a donor advised fund and a donor advised fund is literally like a charitable organization you put your money into and you get the full deduction right now. Then the money sits in the fund and then you can gift it out over time to whatever organizations, that you want to.

Scott:

So it’s your own charitable trust?

Jeff:

You’re spot on. It enables you to gift money. I use something like that for myself because it helps me track my gifting and a lot of these donor advised funds literally have neat websites and they track all of the money that you give and you can kind of see your history of giving and that sort of thing. So there are many different tools but that is an example that can be considered. Another quick idea this time of year, there are people that like to give investments or shares of stock to family. There are some websites that you can go out there and Google that are some kind of unique stock gift websites where you can basically buy one share of stock, ABC company or XYZ company, and they frame the certificate for you send it to you. And then you give that to a family member or somebody that you want to give a share of stock. So they can kind of package that for you automatically. Kind of a neat idea Christmas time as well.

Scott:

I’d rather have the gift stock from you, Jeff, for Christmas than you naming a star for me.