Ask KT & Suze Anything: Revisiting Can I Give My Child Money and Get a Tax Deduction?

Summary

Podcast Summary: Suze Orman's Women & Money (And Everyone Smart Enough To Listen) Episode: Ask KT & Suze Anything: Revisiting “Can I Give My Child Money and Get a Tax Deduction?”
Release Date: April 10, 2025
Host: Suze Orman Media

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Introduction

In this engaging episode of Suze Orman's Women & Money, Suze Orman, alongside her co-host KT, delves into listener questions, providing comprehensive financial advice grounded in over four decades of expertise. The episode focuses on gifting money to children, retirement account management, estate planning, insurance choices, and tax implications, all tailored to empower listeners with actionable insights.

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Gifting Money to Children and Tax Deductions

Listener Question by Marlene (01:40):
Marlene, a 75-year-old listener, inquires about gifting her 50-year-old son $17,000 to help with his substantial student loans while seeking a tax deduction. She wonders whether paying his bills directly would grant her the desired tax benefits or if transferring funds from her IRA to a Roth IRA is a better strategy.

Suze Orman's Response (02:06):
Suze clarifies that while gifting up to $18,000 annually to any individual is permissible without tax implications for either party, such gifts do not offer a tax deduction for the giver. She emphasizes that paying her son's loan won't provide a tax write-off and encourages Marlene to consider the emotional and practical impacts of her gift rather than the tax benefits. Suze advises Marlene to assess whether alleviating her son's debt will genuinely enhance his well-being and whether he is responsibly managing his finances.

Notable Quote:
Suze Orman states, “The goal of money is for you to be secure. And there is no better way for you to be secure than having an emergency savings account.” (00:00)

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Managing Retirement Accounts: 401(k)/403(b) to IRA Transfers

Listener Question by Peggy (12:06):
Peggy seeks advice on the purpose of transferring her 401(k) and 403(b) accounts into an IRA as she approaches retirement.

Suze Orman's Explanation (07:07):
Suze explains that rolling over employer-sponsored retirement accounts into an IRA offers greater diversification and investment options. While 401(k) and 403(b) plans often limit investment choices to specific mutual funds or company stock, an IRA allows for a broader range of investments, including individual stocks, ETFs, and bonds. This flexibility is crucial for tailoring one's investment strategy to align with retirement goals and risk tolerance.

Notable Exchange:
Marlene prompts KT with a quiz, leading Suze to detail the reasons for transferring retirement funds, emphasizing diversification and control over investments. (08:01)

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Estate Planning: Handling Large Sums of Money Found Posthumously

Listener Question by Pat (13:02):
Pat asks about the appropriate steps to take upon discovering a large sum of cash ($200,000) in a deceased loved one’s home. She wonders if depositing such a significant amount in a bank would raise suspicions.

Suze Orman's Guidance (13:23):
Suze advises that while $200,000 is substantial and could generate significant interest if invested, Pat should consult with an estate lawyer to ensure proper handling. She recommends depositing the money into an estate account, accompanied by necessary legal documents such as a death certificate and the will or trust, to legitimize the funds. Transparency with the bank about the source of the money is crucial to avoid legal complications. Suze underscores the importance of professional guidance in managing inherited funds to comply with legal and tax obligations.

Notable Quote:
Suze emphasizes, “$200,000 is a lot of money. And if you just let it sit there in cash, you're missing out on about $10,000 a year currently in interest.” (13:37)

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Including Rental Property in Living Trusts

Listener Question by Lou (16:48):
Lou questions whether to include a rental property that generates $2,550 monthly income in his living trust, noting that his primary home is not included.

Suze Orman's Insight (17:04):
Suze explains that including rental properties in a living trust is beneficial for estate planning, as it ensures smooth transfer of assets without probate, which can be costly and time-consuming. She highlights that while trusts don't affect income taxes, they play a crucial role in managing assets in the event of incapacity or death. Suze advocates for comprehensive asset inclusion in trusts to enhance financial security and simplify future estate administration.

Notable Statement:
Suze asserts, “Both should absolutely be put as many assets as you have, right? It's not about the probate, it's about incapacity.” (19:08)

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Dental Insurance vs. Dental Plans

Listener Question by Sarah Berg (20:07):
Sarah seeks advice on whether to opt for dental insurance or a dental savings plan after leaving her job, considering her good dental health at age 55.

Suze Orman's Recommendation (20:28):
Suze advises against traditional dental insurance unless it’s provided by an employer. Instead, she recommends dental savings plans, which typically cost around $150 annually and offer significant discounts on dental procedures without waiting periods or usage limits. These plans provide flexibility and cost-effectiveness, especially for individuals with generally good dental health who may only need occasional services.

Notable Quote:
Suze recommends, “With a dental savings plan, maybe if it's just you, it will cost you $150 a year and you can save anywhere from 10 to 60% on procedures.” (20:33)

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Tax Implications of Short-Term Capital Gains on Roth Contributions

Listener Question by Wayne (20:40):
Wayne inquires whether income from interest or capital gains from selling stocks held for less than a year counts towards the income threshold affecting Roth IRA contributions, specifically the $146,000 limit.

Suze Orman's Clarification (21:57):
Suze confirms that short-term capital gains are taxed as ordinary income and thus do count towards the modified adjusted gross income (MAGI) when determining eligibility for Roth IRA contributions. This means that gains from stocks held for less than a year will impact Wayne's ability to contribute to a Roth IRA if his MAGI exceeds the $146,000 limit.

Notable Exchange:
Suze elaborates, “When you sell a stock that you have held for less than one year, Wayne, that's taxed to you then as ordinary income, right? So, yes, it counts towards your income.” (22:24)

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Closing Remarks and Empowerment

As the episode concludes, Suze and KT reinforce the core principle of prioritizing people over money and things. They encourage listeners to make informed financial decisions that foster security and personal well-being.

Notable Closing Quote:
Suze Orman emphasizes, “People first, then money, then things. And if you follow that guideline … you will be unstoppable.” (24:18)

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Conclusion

This episode of Women & Money provides listeners with nuanced financial advice on a variety of topics, from gifting money responsibly to strategic retirement planning and savvy estate management. Suze Orman's practical guidance, coupled with her empathetic approach, empowers individuals to navigate complex financial decisions with confidence and clarity.

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Notable Quotes:

• “The goal of money is for you to be secure. And there is no better way for you to be secure than having an emergency savings account.” — Suze Orman (00:00)

• “$200,000 is a lot of money. And if you just let it sit there in cash, you're missing out on about $10,000 a year currently in interest.” — Suze Orman (13:37)

• “People first, then money, then things. And if you follow that guideline … you will be unstoppable.” — Suze Orman (24:18)

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Resources Mentioned:

• Ultimate Opportunity Savings Account: Visit myalliant.com to learn more about opening a savings account with competitive interest rates.

• Dental Savings Plans: Explore options at dentalplans.com for affordable dental care discounts.

• Must Have Documents: Access essential legal documents at musthavedocs.com.

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Disclaimer: The information provided in this summary is for informational purposes only and does not constitute financial, accounting, or legal advice. Consult with a professional advisor regarding your specific situation.

Transcript

[Susie Orman]

Hi everybody. Suzio here. Now, what is the goal of money? The goal of money is for you to be secure. And there is no better way for you to be secure than having an emergency savings account. It is essential for your financial foundation. So all of you should be participating in the Ultimate Opportunity savings account at Alliant Credit Union. Go to myalliant.com to find out more. And be secure.

[KT]

We are strong we are wise we will not apologize we are here we will thrive Together we will rise we're the little bit of faith and everything it takes we are strong we are wise Together we will rise we will.

[Robert]

April 10, 2025 welcome to the Women and Money podcast as well as everyone smart enough to listen. Robert, the producer here, Susie and KT have decided to take some time off and Susie wanted me to tell you that she knows you've been equipped with the right actions to take and not take right now, so she feels that she can attend to family matters. So today we're going to revisit part of an Ask KT and Susie Anything episode from last year and we're going to jump right in with KT asking a question from Marlene. Take it away, KT.

[Marlene]

Susie, I'm 75 and very comfortable. I understand I can gift my 50 year old son $17,000.

[Susie Orman]

Yes.

[Marlene]

He has big student loans and and I need a tax deduction. Can I pay his bill and take the deduction or should I transfer money from my IRA to my Roth ira?

[Susie Orman]

That's actually a complicated one. You thought that was a really easy question, didn't you?

[Marlene]

No, I think the first part might be pretty easy.

[Susie Orman]

Yeah, the first part.

[Marlene]

If there's one part then you can answer that.

[Susie Orman]

I can answer both, but it's not as simple as one might think. You can absolutely gift your son or anybody you want and as many people a year that you want currently $18,000 a year. However, it's not taxable to them and it's not a tax write off to you on any level. The fact that he has big student loans is a very, very different question where you say but I need a tax deduction and can I pay his bills and take a tax deduction? No, you cannot do that. I don't want you to confuse the two, however, because if you're very comfortable, does it make you uncomfortable when you see your son suffering under a lot of student loans at the age of 50? What must that make him feel like? Because probably most of his friends don't have student loans anymore. So the question isn't can you pay that bill and get a tax deduction? The question is, can you pay that bill and still be incredibly comfortable at the age of 75 and take that burden off of your son's back? And would that make him happier? Would that help him in any way? And if the answer to that is yes, it would, then that's probably what you should do. However, if it wouldn't help him, if on some level he's kind of a. Don't take this the wrong way, Marlene, but he's kind of like a financial loser. He's just, you know, not really doing the things he should be doing and maybe still living at home with you, whatever it may be. KT just gave me a look, everybody, but it's me. So it's true. There are many kids that are financial losers, kt. They just are anyway. Then would you just be wasting that money if you were to pay off his bills? And would it just have gone to waste on some level? You and you alone have to decide that as far as transferring your money from your IRA to a Roth IRA, you are the age of 75. You have required minimum distributions that are coming out of your traditional IRA. So just remember, you have to take your RMDs before you can convert any money to a Roth IRA at the age of 75. Does it make sense to do it? I'm not sure it does or it doesn't. But you might want to contact your CPA and see what he or she says. All right, kt. Kt, I have a question for you. You know the question I'm going to ask you? Why does it bother you when I simply say maybe he's a financial loser? Why does that bother you?

[Marlene]

Well, because the first answer was so nice to take the burden off his back. Would it make him happier? Would it make you happier? And then, bam, you flip the coin and say, on the other hand, your son may be a real financial flake.

[Susie Orman]

Yeah, right. So what's wrong with that?

[Marlene]

Well, nothing's wrong with it, but it was so nice in the beginning. I was so happy. I was happy for her and him.

[Susie Orman]

If that had been true, well, let's hope.

[Marlene]

Let's hope the part A is the truth, not part B of the answer.

[Susie Orman]

I hope that Marlene has the courage to stand in her own truth, no matter which one of those things it happens to be, because she's okay no matter what. Next question. Kt.

[Marlene]

Okay, this is from Peggy.

[Susie Orman]

Let's see if I can upset KT again. All right.

[Marlene]

She says Embarrassed. Hi, Susie and kt.

[Susie Orman]

That's what I do to KT all the time.

[Marlene]

I've been watching and listening for over 10 years. But I'm getting ready now for retirement in the next two years. What is the purpose of moving my 401 and 403B into an IRA? I feel so knowledgeable because of you, but I am embarrassed to say I don't quite know how to retire. Did she know you have a book on this?

[Susie Orman]

I am so tempted to say kt. I know we normally wait to the end of the Ask KT and Susie Anything podcast for your quizzy, but guess what? Pop Quizzy, K T, Right now. Right now on this, on this question, everybody, how would you answer this question? Why have I for years been saying to most of you that once you decide to retire, you should look into if you have a traditional 401k or 403b or even a Roth 401k or a Roth 403, look at transferring it or rolling it to an IRA or a Roth IRA. Why KT?

[Marlene]

Well, when you transfer the traditional into your Roth.

[Susie Orman]

No, you would transfer a traditional 401 to a traditional Iraq. It's got to go from pre tax to pre tax or she's going to pay taxes on everything. Right? So.

[Marlene]

But if it's a Roth.

[Susie Orman]

No, don't get confused.

[Marlene]

I don't know.

[Susie Orman]

No, that's it. You just don't know.

[Marlene]

Well, if she's retiring.

[Susie Orman]

Wait, let's pretend it's you. You have money in a 401. You've been working. You haven't ever paid taxes on that money. And now you have a choice of leaving it right there if you want or taking it and putting it in Fidelity or Schwab in an IRA rollover. I have been telling everybody to do that. Why have I been telling everybody to do that? You should see a face.

[Marlene]

Well, because when you get close to retirement, your tax, your tax liability is.

[Susie Orman]

A lot less than when you're working and earning money.

[Marlene]

Okay. Why?

[Susie Orman]

You really don't know?

[Marlene]

No.

[Susie Orman]

Obviously. All right, everybody, especially Peggy, and thank you for this question. Quizzy, if you have your money at a 401k or a 403, which is usually a nonprofit KT, it is with your employer. And normally a 401k plan or a 403 plan only has a specific number of investments. And most of those investments consist of only the company stock that maybe you're working for. But mutual funds, maybe they have a variety of mutual funds, but that's it when you transfer it and put it into an ira. Now you can buy exchange traded funds, individual stocks. You could buy certificates of deposits, you could buy Treasuries. You could buy so many different things. And you could probably even buy the exact same things that the 401k is invested in. So the reason that I tell everybody to transfer it when you leave is so that you can have more diversification as you get older. Maybe you're going to want to put money into individual bonds. You can't buy individual bonds within a 401k or 403b. You could only buy bond funds. And everybody knows I hate bond funds. So therefore, I hope, Peggy, that has answered your question. However, let's say you have a sizable sum of money within the 401k or 403b. Let's just say that's true. And you're comfortable with your investments. You feel secure there. And now you don't want to transfer it because maybe you have to cash it out, even though in most cases you won't have to. But let's just say you. And now you have $800,000 of cash sitting at a discount brokerage firm like Fidelity or Schwab, and now you have to invest it, and you don't have a clue how to do that. So you're scared to death. If that's the situation, then, hey, leave it in the 401k or the 403. Did I get a dink, dink, dink on that?

[Marlene]

Ding, ding, ding, ding, ding, ding, ding. That was good, right?

[Susie Orman]

Did you learn that?

[Marlene]

Well, I didn't realize that the reason, the biggest reason, is that you have a great deal of choice in diversification.

[Susie Orman]

That's the only reason, Fran. All right, next question.

[Marlene]

Okay, this is a great. This. I read this question and I'm thinking to myself, wow, what would I do? What would Susie do?

[Susie Orman]

What would Susie do?

[Marlene]

What would Susie do?

[Susie Orman]

Wait.

[Marlene]

Morning.

[Susie Orman]

One of my favorite things, right, is that sometimes we'd be in a restaurant, everybody, or even a bookstore, and I'd be standing in line to get a book, and people would be in front of me and they had my book in their hand or on an airplane, and I would hear them talking like they'd usually be with a friend. And they would always say, what do you think Susie would do? What would Susie do?

[Marlene]

Well, here's a good one. Ready?

[Susie Orman]

Wait. And then kt I would lean over and I go, well, I'll tell you what I would do. And they'd always go, that's her.

[Marlene]

It's her. It's her. All right, ready? This is from Pat. And Pat said, good morning, Susie.

[Susie Orman]

It is.

[Marlene]

Here's our question. What should a person do when they find a large amount of money in the home of loved ones who have passed? Will the bank question a large deposit? I think the bank would be the safest place. Now, what would Susie do?

[Susie Orman]

Well, Susie, as many of you may know, actually read a lot of these questions. And I wrote this person back and I said, how much is a large sum of money?

[Marlene]

Did they tell you?

[Susie Orman]

Yes. And they wrote back and they said, $200,000.

[Marlene]

Someone stashed cash.

[Susie Orman]

Her father didn't really believe in debt. He didn't really believe in banks. And little by little, he would take his paycheck and everything and he would just stash it in the house in cash.

[Marlene]

Wow.

[Susie Orman]

And now she has found it. So the question is, what would Susie do? First of all, you have to realize that $200,000 is a lot of money. And if you just let it sit there in cash, you're missing out on about $10,000 a year currently in interest. That's number one. But number two, the very first thing I would do is if you have a lawyer that was settling the estate for your father, maybe he had a home that needed to go through probate or whatever, I would first consult with him or her and ask for their opinion. Chances are what they are going to tell you to do. And if you don't have one, you might want to find one and just consult with them. But would be to find a bank. Either the bank that your father was dealing with, but maybe he didn't have a bank. But maybe you have a bank where you have connections with that bank. Because if you ever deposit $10,000 or more at one time, they're going to report it. And they're going to report it because that's a lot of money. If you deposit $200,000 at one time. Oh, there are going to be a whole lot of questions. So you should take the death certificate, his will or trust, showing everybody that you're the beneficiary of everything and that you found this money while getting your father's house in order to sell or whatever reason you were looking through this stuff and just come clean. Now maybe they'll make you pay taxes on it. You never know. Maybe they'll say, oh, okay, because he never had a bank account or whatever. They'll understand that and they'll just let you have it. Right. But it should probably Be if you go to a bank that you open up an account not in your name but in the estate of your father. So it sits in that account. So then it becomes part of the estate. That is a very simplistic thing of what Susie would do. All right, kt, next question.

[Marlene]

All right, this is from Lou. Susie. Should we include our rental property that is paid for in our living trust? The property provides us an additional monthly income of $2,550.

[Susie Orman]

One has nothing to do with the other.

[Marlene]

Listen to this. We were not going to include our primary home in the living trust.

[Susie Orman]

And why the heck do you even have a living trust?

[Marlene]

We are both 70 plus years old. Listen, Lou, explain to Lou why there's a trust.

[Susie Orman]

The main reason that you want a trust is so that your home, your rental property, things that really don't have a transfer of title, like a life insurance policy you have a beneficiary of that doesn't go through probate. Your retirement accounts has a beneficiary, doesn't go through probate. And I'm not a fan, by the way of having a trust be a beneficiary of a retirement account, as I have told you many times, but it's very difficult with a home. The main way you avoid probate with a home is you own the home, enjoying tenancy with right of survivorship. But then when the person you left it to dies, does it go through probate? And remember, when a home goes through probate, it's not how much you owe on the home, it's how much it's worth. So for instance, if you have a $500,000 home and you still owe $250,000 on all $500,000 is going to go through probate. And depending on what state you're in, probate can be really, really expensive. So Lou, you need to understand, why do you have a trust? What are your reasons for not having your home and rental property within the trust? It doesn't affect your income taxes on any level. It's the exact same as if you have a trust. Like KT and I both have trusts and we pay the same income tax whether we had a trust or we didn't have a trust. What happens, however, is what happens to that money when something happens to us.

[Marlene]

It sounds like Lou didn't understand that he could have both of these in his trust.

[Susie Orman]

Yes, but he didn't.

[Marlene]

It sounds like he want. He was trying to tell us he decided not to put his primary home in it.

[Susie Orman]

Both should absolutely be put as many assets as you have, right? It's not about the probate, it's about incapacity. If something were to happen to you and you don't die, who pays your bills? Lou? Who writes your checks? Who makes sure that the mortgage and the insurance and everything is paid? That's why you want a trust that has an incapacity clause. And for those of you who are asking, the must have docs are back on sale. All you have to do is go to musthavedocs.com and you will find them. $2,500 worth, state of the art documents for $99. All right, KT, next question.

[Marlene]

This is from Sarah Berg. I need to find dental insurance soon due to leaving my job. I know you love dental plans. Would I want to have dental insurance and dental plan or just the dental plan? My teeth are in good shape, but I'm 55, so who knows what's coming as far as dental care needs?

[Susie Orman]

Well, I'll tell you what's coming.

[Marlene]

Yes, Sarah, I'll tell you too.

[Susie Orman]

We both will tell you what's coming.

[Marlene]

Thousands of dollars of dental work, but get the dental plan. Tell her to get the service plan.

[Susie Orman]

Yeah. I would not be getting dental insurance if I were you. I am not a fan of dental insurance unless you work for a company that pays for it. For you, I and KT and Kolo and all of our friends and friends have something called a dental savings plan. Go to dentalplans.com. look at it. Normally dental insurance could be $100 or $150 a month. Normally they have high deductibles and waiting periods. With a dental savings plan, maybe if it's just you, it will cost you $150 a year and you can save anywhere from 10 to 60% on procedures. No waiting period and no max out of how much you can use it. So again, dental plans dot com. Next kt.

[Marlene]

Okay, my final question. Short and sweet. Does the income I earn from interest or capital gains from selling a stock held less than a year count towards the 146,000 income before I have reduced ROTH contributions? That's from Wayne.

[Susie Orman]

Do you want another quizzy?

[Marlene]

Well, all right, let me see. Hold on. All right, everybody, let me see if I can redeem my lack of knowledge here.

[Susie Orman]

Don't teach yourself.

[Marlene]

Does the income I earn from interest or capital gains from selling a stock held less than a year count towards the 146 that I held less? I think that the answer is whatever income you have when you reach that limit. That's the limit. Doesn't matter when.

[Susie Orman]

That's not the question. The question is, if this person has held a stock for less than a year, obviously outside of a retirement account and they sell it, does that gain count towards the calculation of income where the max is 146 for a single person?

[Marlene]

Want me to answer it? Yeah, I think it does. I think it does. I think. Yeah. All I know is in. In America, whatever money you make is your income, right?

[Susie Orman]

Not actually, however. But it is true when you sell a stock that you have held for less than one year, Wayne, that's taxed to you then as ordinary income, right? So, yes, it counts towards your income, even if it's a capital gain, the way they figure capital gains, it gets figured in with your income and all of that. So either way it probably would. But definitely in this situation, it will count towards that. $146,000 of modified adjusted gross income. What are you eating?

[Marlene]

It's a cough drop from my throat.

[Susie Orman]

Do you have a sore throat?

[Marlene]

It's not sore, but it's a little dry.

[Susie Orman]

It's dry, huh?

[Marlene]

Yeah, because I've been swimming in the ocean with Susie every day till we got this bout of rain. But we better sign off. It's late. We're over our limit here, everyone.

[Susie Orman]

Oh, actually, kt, we're the bosses. So we make the limit be whatever we want it to be. However, there's really only one thing that we want you to remember when it comes to your money. What is that, kt?

[Marlene]

People first, then money, then things. And if you follow that guideline and.

[Susie Orman]

If you stay safe, you will be what? Unstoppable.

[KT]

We are strong, we are wise we will not apologize we are here we will thrive Together we will rise we're the open of faith and everything it takes. We are strong we are wise Together we will rise. Foreign.

[Susie Orman]

Hi, everybody. Suzy O here. Now, if you are looking for a way to start saving to get the most out of your money, I want you to go to myalliant.com, that's M Y A L L I A N T.com and look into opening an ultimate opportunity savings account. Put in at least $100 a month, every single month for 12 consecutive months, earn 3.10% interest on your money right now and get $100 at the end. Are you kidding me? It's the best deal out there. Start saving right now.

[Robert]

Neither Suze Orman Media nor Susie Orman is acting as a certified financial planner advisor. A certified financial analyst, an economist, cpa, accountant, or lawyer. Neither Suze Orman Media nor Suze Orman make any recommendations as to any specific security, securities or investments. All content contained in this podcast is for informational and general purposes only and does not constitute financial, accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Susie Orman Media nor Suze Orman accepts any responsibility for any losses which may arise from accessing or reliance on information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss damages, direct or indirect, arising from the use of this information. The must have documents discussed in this podcast are legal documents created by a lawyer and distributed by Hay House.