By Thomas Kostigen
Actor George Clooney gifted 14 friends a million dollars each. In cash. In 20-dollar bills. In briefcases.
He handed over the amounts because, as he told Deadline news, “I was making out my will for all the things you do when you get to be in your 50s. You write out your will and who you’re leaving things to. I was like I’m leaving everybody a little bit of this. But I was thinking why am I waiting? Waiting for everybody to be 80 and buy really nice dentures? I just want to get going.”
The idea of gifting before death isn’t anything new, of course. It’s one of the big reasons that foundations exist. And historically it’s been used by the ultra-rich as an estate planning tactic. But is it a good idea? That depends on both parties’ financial situation and goals. An individual can give away, or gift, as much as $11.58 million over the course of his or her lifetime (an amount set to rise to $11.7 million next year). Any gift of more than $15,000 in a single year requires that the giver files a gift tax return with the Internal Revenue Service. Recipients don’t have to worry about taxes: you can receive an unlimited amount as a gift without paying taxes, although how you use the assets could kick off a taxable event.
Clooney was clearly aiming for something other than a financial transaction with his gifting: goodwill among friends, and a bit of spreading the benefit of financial freedom. It may be tempting to follow Clooney’s lead, especially during this holiday season when so many are in need due to the COVID-19 pandemic.
The National Philanthropic Trust reports that giving is on the rise — and this was pre-pandemic. Corporations gave away more than $21 billion last year, and foundations more than $75 billion. That was a rise of 13.4 percent and 2.5 percent, respectively. Interestingly, it’s individuals who gift the most money: nearly half a trillion dollars in 2019 alone, representing a rise of more than five percent from 2018. Want to have faith in your fellow human? Well, there it is.
When you should gift, however, is another question altogether. To be sure, a financial advisor who specializes in estate planning can provide the best advice on when and how much you should gift. There are other options besides cash that might be considered, including stock, real estate, or other gifts of value (such as art) that might be better for the benefactor as well as the recipients, from a tax point of view. There are also hosts of possibilities for the vehicle from which you give, such as a living will, living trust, or donor advised fund.
You can bet George Clooney consulted with a top ranked estate planner before giving away a small fortune. For him, the amount wasn’t all that much. Clooney sold his tequila company, Casamigos, for a reported $1 billion, and his net worth is estimated at $500 million.
Time to “friend” some celebrities and high net worth individuals on social media? You bet.
Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.
