Ask Linda: Gifting Stock to my Child

Ask Linda: Gifting Stock to my Child

I am a widow and want to gift some of the individual, concentrated stock in my brokerage account to my only child, my adult son. I am tired of managing the stock and feeling like I need to stay on top of the earnings reports, news, etc. I would rather gift it to him and have the rest of my portfolio in low-cost, diversified positions. The stock has a very low basis and will incur a large amount of long-term capital gains upon selling. What are your thoughts?

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Just married! Should we combine finances?

I asked Cinda Jones, a Certified Divorce Financial Analyst (CDFA) and owner of Divorce Financial Solutions, to help me answer this complicated question.  Please note that these answers are general in nature.  For answers to any specific questions, it is always wise to consult an attorney in your state.   Retirement Assets (401k's, IRA's, 403b's, etc):  Contributions and benefit accrual during marriage are community property and will be divided in the settlement agreement upon divorce.  Even if only one spouse is contributing to a plan during marriage, the other spouse is still entitled to half of the value accumulated during the marriage.

Non-Retirement Assets (Brokerage Accounts, Individual Stocks, etc.):  Cinda recommends keeping these separate and keeping all records.  She says to never throw away mortgage purchase or refi documents, bank statements, investment statements and tax returns.  During a divorce, the burden of proof falls to the person who wants to make a separate claim or ask for reimbursement.  Surprisingly (at least to me in this digital age), she has found it may be impossible to obtain historical records from financial institutions or even the IRS.

Other situations I see fairly frequently: Gifting from parents to help with a house down payment, an inheritance used to help remodel the joint home and rental properties or businesses that were established before marriage.  Cinda cautions that it is very hard to generalize in these situations and the rules may vary by state.  Regardless, even if there is a valid separate property claim, the burden of proof falls on the person making the claim so you need to have supporting documents.

How I use Mint.com

I use Mint.com to track expenses. While it is not the only automated system available, it is one of the most widely used and the price is right (free). That being said, I have a bit of a love / hate relationship with the program. I don't like being bombarded with advertisements and irrelevant recommendations, but it captures all of my monthly transactions across multiple accounts and provides clarity on our household spending versus our budget. Here is how I use it: Weekly: I log into Mint and let the accounts update (this takes a few minutes). Once they are updated, I go to "Transactions". View recent transactions and confirm they are categorized correctly.

Monthly: I go to "Budgets" and see how we did with our spending in various categories versus the budget. I focus on discretionary items like eating out and shopping since our mortgage, car payment and utilities don't really change month to month.

Monthly: I go back to "Overview" which is the homepage. Scroll down to the lower left-hand corner to view the Net Income chart. Make sure you are earning more than you are spending. If your goal is to have $1,000 / month surplus, the net income should consistently show around that amount.

Do not upload business accounts to Mint. Keep them separate for accounting and cash flow purposes. I use Quickbooks Online for business accounts and find it easy and effective once it is set up.

Other solutions I have heard of: You Need a Budget (YNAB), Toshl and Mvelopes. What system do you use? Email me at linda@planningwithinreach.com.

Living to 100

At a national financial planning conference this year, I heard a speaker who is a Medical Doctor turned Financial Planner. She has all new clients go to Livingto100.com and complete the online questionnaire with her. The questionnaire gauges probable life expectancy and enables the planner to estimate a possible end date (end of life) for the client's financial plan. This is helpful not only for the retirement plan, but also to help clients understand the factors that insurance companies look at when calculating insurance premiums. For example, did you know premiums are much cheaper for people with BMI's (body mass index) lower than 28? Living to 100 asks for an email address at the end of the 15 minute questionnaire. I answered the questions and it came up with an estimated life expectancy of age 97. It also gives you feedback. For example, I was told if I cut my caffeine consumption I could add a 1/2 year to my life. That is not really enough to motivate me to change but you may find something that compels you to adjust current habits.

What do you think? Is this too personal? Or is there a benefit to adding something like this to the financial planning process? Share your thoughts with me by emailing linda@planningwithinreach.com.