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U.S. Bancorp Employees: Three Key Strategies for Tax-Free Giving to Your Family

Healthcare Provider Update: Healthcare Provider for U.S. Bancorp U.S. Bancorp, the parent company of U.S. Bank, primarily partners with UnitedHealthcare for its corporate health insurance offerings. This relationship allows U.S. Bancorp to provide a range of health benefits to its employees through UnitedHealthcare's extensive network and services. Potential Healthcare Cost Increases in 2026 In 2026, U.S. Bancorp may face substantial healthcare cost increases, influenced predominantly by rising insurance premiums driven by multiple factors. Record hikes in premiums are anticipated as federal subsidies from the Affordable Care Act expire, which could result in over 22 million enrollees experiencing steep out-of-pocket expenses. With major insurers like UnitedHealthcare requesting rate increases upward of 66% in certain markets, U.S. Bancorp's healthcare costs could rise significantly, compelling both the company and its employees to navigate a more expensive healthcare landscape. This situation highlights the urgent need for strategic planning to mitigate the financial impact on employees and the company's overall benefits strategy. Click here to learn more

'Gifting is a great way to transfer wealth but if it is not done correctly, it can result in taxes being paid on the wrong account,' says Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement Group.

“High net worth individuals are looking for ways to help their families now rather than later, but they need to make sure their generosity is consistent with a good financial plan,” says Mavar.

In this article, we will discuss:

The tax consequences of giving away money during one’s lifetime as opposed to on death.
Strategies for enhancing tax exemptions when giving out large amounts of money.
The short and long-term effects of gifting on both the donor and the recipient.

The employees of U.S. Bancorp companies are often involved in the financial planning and therefore try to make significant gifts of money to their families while they are still alive rather than only through bequests after death. This trend is easy to explain: it is fun to see the results of such generosity in the modern world, for instance, to help with buying a home in the current real estate market or to pay for college for grandchildren. However, this approach comes with its own set of challenges, especially in terms of tax efficiency.

Giving Wisely: How to Increase the Impact of the Gift While Minimizing the Tax Risk

One of the main benefits of bequeathing assets like stocks is the “step up” in basis, which sets a new value of the asset at the market price at the time of the owner’s death. This means that heirs can sell the inherited stocks at the current high prices without having to pay capital gains tax on the proceeds as long as the sale price equals the stepped up basis. On the other hand, gifts of stocks during one’s lifetime are not exempt from this adjustment. The original purchase price, or basis, stays there, which can result in very high capital gains taxes if the stock is sold when market prices are high.

However, if the gift recipient’s income is below the following limits: $47,025 for singles and $94,050 for married couples filing jointly, they can sell these stocks without having to pay capital gains taxes on them. This creates a perfect situation for U.S. Bancorp employees to help their family members who are starting their careers or earn less than these limits. It is important to avoid such transactions as they may lead to higher taxable income and, therefore, taxes.

Taking Full Advantage of the Gift Exemptions

According to the current rules, an individual can make a gift of up to $18,000 per recipient in 2024 without having to report the gift on his or her tax return and have it count against the taxpayer’s lifetime gift tax exclusion. In the case of married couples, the split gifting technique enables each spouse to make an $18,000 gift to the same person, thus enabling the two to give $36,000 every year tax free. In case gifts are made which are more than these figures, the excess must be reported on IRS Form 709, however, taxes are not due until the exclusion amount is exceeded which is currently $13.61 million. The annual exclusion is also available for gifts that are made during the year of death and in the year following death.

Another way to avoid the annual gift tax exemption is to make the payment directly for the health or education of another person. For instance, payments made directly to educational institutions are not considered as part of the $18,000 annual exclusion for gifts and, therefore, U.S. Bancorp employees can provide generous support without compromising their lifetime gift exemption. This way, the money is used precisely for its intended purpose and there is no chance that the recipient will spend it on something else or become financially dependent.

Assessing the Financial Impacts of Gift Giving

This means that U.S. Bancorp employees should also consider the tax consequences of the financial gift that they are planning to give to their recipient. Support should always be given with the aim of empowering the recipient, not enabling them or making them dependent. This assessment is important in order to determine if the giving is helping or harming the recipient.

The donor’s financial stability is just as important as the recipient’s. Such gifts can be made sustainable by a financial plan that has been developed by professional advisors. In this way, U.S. Bancorp employees can ensure that they are able to give in a way that is consistent with their financial future.

In conclusion, it is an excellent practice to give but it is advisable to know the strategies that can be employed in order to reduce the amount of tax paid and at the same time, achieve the desired results. By looking at the short and long-term consequences of their generosity, U.S. Bancorp employees can make reasonable decisions that will benefit them and their families. For those who are involved in the process of financial gifting, more specific plans and options can be provided by thorough planning tools and the advice of financial professionals.

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An IRA Qualified Charitable Distribution (QCD) can also be a useful approach, especially for retirees. An individual who has reached the age of 70½ can transfer up to $100,000 each year from his or her IRA to a charitable organization. This can help achieve charitable goals while also potentially leaving the donor in a lower tax bracket, as the donation is not included in taxable income and satisfies RMDs. This approach is in harmony with strategic estate planning and holds the advantage of not affecting non-charitable beneficiaries.

Sources:

Internal Revenue Service. 'Gift Tax.' IRS.gov, 2024, www.irs.gov/businesses/small-businesses-self-employed/gift-tax .
Investment Company Institute. '2024 Annual Report on U.S. Retirement Market.' ICI.org, 2024, www.ici.org/research .
Wealth Enhancement Group. 'Estate Planning and Wealth Transfer Strategies.' WealthEnhancement.com, 2024, www.wealthenhancement.com/insights .
U.S. Securities and Exchange Commission. 'Understanding Capital Gains Tax.' SEC.gov, 2024, www.sec.gov/investor .
National Association of Estate Planners & Councils. 'Best Practices in Lifetime Wealth Transfers.' NAEP.org, 2024, www.naepc.org/articles .

How does the U.S. Bank Legacy Pension Plan calculate the Final Average Total Pay and Final Average Base Pay for employees, and what implications might these calculations have for retirement planning? What factors should employees at U.S. Bank consider when planning for their eventual retirement based on their pay history?

The U.S. Bank Legacy Pension Plan calculates Final Average Total Pay by taking the average of an employee's Total Pension Pay for the five consecutive calendar years during the last ten years of employment that provide the highest average. Similarly, Final Average Base Pay is calculated by averaging the Base Pension Pay for the same five-year period. Total Pension Pay includes base pay plus commissions, bonuses, and overtime, while Base Pension Pay only includes base salary and a few other components such as shift differentials and premium pay. These calculations significantly affect retirement planning, as higher pay during the last years of employment can lead to a more substantial pension benefit(US Bancorp_January 2023…).

What steps does U.S. Bank require for employees who wish to commence their pension benefits, and how does the timing of this commencement affect the benefits they will ultimately receive? Employees at U.S. Bank should understand the critical timelines associated with the retirement process, including the importance of initiating their requests within specific timeframes.

Employees who wish to commence their pension benefits must initiate the process at least 30 to 90 days before their intended benefit commencement date. The timing affects the benefits, as early retirement (before age 65) results in reduced monthly benefits due to the extended period over which benefits are paid. Conversely, delaying the commencement of benefits until the full retirement age (65) or later ensures the maximum monthly pension benefit(US Bancorp_January 2023…).

What are the different forms of payment options available under the U.S. Bank Legacy Pension Plan, and how might these options change based on the employeeâ€™s age and years of service? U.S. Bank employees need clarity on how to choose the best payment option to meet their individual needs in retirement.

The Plan offers several payment options, including a single life annuity, joint and survivor annuities (50%, 75%, or 100%), and estate protection annuities. These options can vary based on the employee's age and years of service. For example, younger employees may have a reduced monthly benefit if they choose early retirement, while older employees nearing or beyond age 65 will receive full benefits without reduction. The employee's choice of annuity type also affects the monthly payout and survivor benefits(US Bancorp_January 2023…).

How does U.S. Bank ensure the security of employees' pension plan information and personal benefits data, and what measures should employees take to protect their information? Employees should be informed about the companyâ€™s security protocols and best practices for safeguarding sensitive information related to their pension.

U.S. Bank implements several security measures, including encouraging employees to use strong, unique passwords for accessing benefit information and enabling multifactor authentication. Employees should also regularly monitor their account for unauthorized transactions, update contact information to receive notices, and use secure networks when accessing their pension plan data(US Bancorp_January 2023…).

In the event that an employee at U.S. Bank undergoes reemployment after retirement, how does this impact their pension benefits and what should they be aware of regarding benefit accrual? Employees need guidance on how transitioning back to work could affect their pension plans and retirement strategies.

If a retired U.S. Bank employee is rehired, their pension payments continue as usual. However, they will not accrue any additional benefits under the Legacy Pension Plan but may be eligible for participation in the Legacy 2010 Cash Balance Portion of the Plan. It is essential for rehired employees to understand the implications on their pension accrual and benefits(US Bancorp_January 2023…).

What are the eligibility requirements for participation in the U.S. Bank Legacy Pension Plan, and how do changes in employment status affect an employee's pension benefits? U.S. Bank staff should have a comprehensive understanding of eligibility criteria and how various employment changes can impact their pension rights.

Eligibility is limited to employees who had earned a benefit before January 1, 2020, or those rehired in an eligible position. Employment status changes, such as termination or reemployment, can affect whether an employee remains in the Plan. For example, employees rehired after January 1, 2020, may not accrue additional benefits under the Legacy Pension Plan(US Bancorp_January 2023…).

What specific rights do U.S. Bank employees have under the Employee Retirement Income Security Act (ERISA) in relation to their pension plan benefits, and how can they enforce these rights? U.S. Bank employees must be made aware of their legal rights to access plan information and contest any disputes regarding their benefits.

Employees have rights under ERISA to access plan information, file claims, and appeal denied claims. U.S. Bank employees can enforce these rights by submitting claims or appealing denials through the Plan's claims and appeals procedures. Additionally, employees may bring legal action if they exhaust the Plan's internal processes(US Bancorp_January 2023…).

How does U.S. Bancorp ensure that its pension plan complies with current IRS limits, and what should employees know about potential tax implications on their pension benefits? Clear communication from U.S. Bank regarding tax consequences and IRS guidelines for retirement benefits is crucial for employees to manage their finances effectively post-retirement.

The Plan adheres to IRS regulations, including limits on annual earnings ($330,000 in 2023) that can be considered for pension benefit calculations. Employees should understand the potential tax implications on their pension distributions and are encouraged to consult tax advisors to ensure proper tax handling(US Bancorp_January 2023…).

What processes are in place for U.S. Bank employees to file claims or appeals if they believe they are entitled to additional benefits under the pension plan? Employees at U.S. Bank should be informed about the claims process and know their options for seeking justice if their claims are disputed.

Employees can file claims or appeals by contacting U.S. Bank Employee Services or accessing the Plan’s claims procedures. Deadlines apply, and employees must submit claims within the specified time limits to avoid losing their rights to additional benefits(US Bancorp_January 2023…).

How can U.S. Bank employees contact the company for further assistance regarding the U.S. Bank Legacy Pension Plan, and what resources are available to them through the Employee Services division? Itâ€™s essential that U.S. Bank staff knows how to reach out for support regarding their retirement benefits and understands the services provided to help them navigate their pension plans.

Employees can contact U.S. Bank Employee Services by calling 800-806-7009 and selecting "Savings and retirement." Additionally, the Your Total Rewards website provides 24/7 access to pension information and support. Employees are encouraged to use these resources for assistance with their pension plan(US Bancorp_January 2023…).