John Ruskin quote


There is no better way to build real wealth than to find ways of raising up the children in our lives. Whether it's the young people in our families—children, grandchildren, nephews, nieces, cousins—or those in our personal networks, such as godchildren, or children in our faith- and school communities and in our community at large, many opportunities exist to support our children to learn, grow, and prosper.

 
Happy childrenAt a time when bank deposits and investing in the stock and bond markets offer limited opportunities for significant current returns on investment, and the risk of loss on even traditionally low-risk securities is real, meaningful gifting to the next generations can provide bountiful dividends far into the future.

Gifting to children is something we can all do, no matter what our financial circumstances are. I started out thinking in terms of a maximum annual monetary investment per child of $13,000 (for a single donor) or $26,000 (for married-couple donors), which reflects the maximum annual U.S. federal gift tax exemption (see section on tax issues below). The more I explored gifting opportunities, however, the more I realized how many ways we can gift with much less money than that—even at little or no cost.

ChildrenVarious gifting options can be evaluated on a continuum of time and money allotted, providing multiple opportunities for family members or friends to “conspire” to gift together. And the number of opportunities expands enormously when those who have time and those who have money pool their resources to help the children they love. Indeed, we can not only help our children to learn and grow, but we can also create important volunteer and paid positions that help provide purpose and income for those of us who find ourselves unemployed or underemployed.

This review focuses on gifts designed to help children build the knowledge, habits, and skills they need to understand and participate in our economy and the investment process, and to become financially independent. It also highlights ways for children to understand and relate to real assets and enterprises rather than financial speculation and manipulation.

Members of my Solari Circle were solicited for input on these topics. In the process of brainstorming, we realized that readers might be interested in participating as well. If you have ideas on gifting to the children you love or success stories you would like to share, I would be delighted to review these for possible publication to supplement this article. Please send them to communicate@solari.com and specify whether you would like them shared on a named or anonymous basis.


Table of Contents
Gifting ideas and related issues have been organized as follows:


Building Good Health
Good health is the foundation of a successful life. It is challenging to find or pursue your calling if you are struggling with poor health.

Maintaining optimum health requires considerably more significant investment than in prior generations. This is because of vastly increased health risks in our era from extreme toxicity in our environment and compromised immune systems due to GMO- and processed foods, chemtrails, and vaccines, and other factors that jeopardize our health. Because children are naturally strong, we run the risk of underestimating the proactive investment needed to ensure that their health is protected in a deteriorating environment.

Health-related gift-giving often entails helping a child’s parents financially, because they are the only ones who can make the day-to-day purchasing decisions that affect the child’s diet, exercise, and exposure to toxicity.


Examples:

  • High-quality Food: Pay for or supplement family food bills up to a given amount per year.
  • Clean waterClean Water and Air: Pay for the family to dig a well (if they own their home and the location, topography, and local land-use regulations permit) to provide water free of fluoride and other unhealthy chemicals. Where a well is not possible, pay for water testing and a whole-house or faucet-based water filter or filters. Purchase one or more air filters, particularly in any home in which a family member smokes. Have the home’s ductwork and/or chimney cleaned.
  • Cooking Skills: Hire a nutritionist, dietitian, cook or others with excellent training in nutrition to develop family menus that will address children’s individual health issues. Keep the focus on providing a long-term, sustainable plan for meals that are palatable to sensitive taste buds, followed by lessons for children and other family members on how to prepare tasty dishes with nutritional ingredients. Consider replacing toxic cooking utensils, such as silicon-coated pans, with safer versions. Have china and glassware tested for lead toxicity and replace as necessary.
  • Immune System/Detox: Pay for a full series of testing by a nutritionist, naturopath, or other alternative health practitioner to identify vulnerabilities, toxicities (e.g., allergies, heavy-metal poisoning, vaccine and radioactive toxins—any of which can cause attention deficit disorder) and other health conditions that may not be identified by traditional medical doctors or testing procedures. Follow up by paying for the recommended therapies indicated by the test results.
  • Horseback ridingAthletic Lessons/Equipment:  Fund horseback riding, sailing, squash, soccer, lacrosse, gymnastics, ice skating, dancing, or similar group or private lessons or camps throughout the school year or during vacations and summers. People who do not have children of their own may not know that team sports and uniforms can cost hundreds of dollars per season. Buy or rent necessary equipment and clothing (including proper shoes). Hiring a personal trainer/tutor may be a sound alternative, especially for children who may be too far behind their peers for team sports or who have serious physical issues or handicaps.
  • Health Club: Pay for a membership at a health club or YMCA that offers youth programs in exercise, yoga, swimming, and other health-related activities.
  • Health Care: Offer to pay for the child’s health care bills or insurance deductibles and copayments, up to a preagreed amount.
  • Support for Behavioral Problems: Provide for health care and other support and treatment to help children with a behavioral problem or an addiction. Support participation in programs for avoiding or withdrawing from using illegal substances or, if appropriate, Ritalin and other psychotropic drugs. This includes helping parents to replace disability payments they may lose if the child is healed or stops being medicated.
  • Deleting TV: Make a contract with a child or family to reduce or end their TV-watching time in exchange for participation in local library programs or alternative activities and entertainment
    that you will fund.


Building Practical Skills
Before school curricula were changed to graduate young men and women oriented toward becoming good consumers and corporate employees, children learned a much wider range of practical skills than they do today.
Supplementing school courses with a wide range of experiences and practical skills helps children become more self-sufficient and, therefore, more financially independent.These skills can also help children be supportive
of their immediate family.


Examples:

  • GardeningGardening: Help start a family garden or edible landscape so that children can learn how to grow their own food. If there is interest, help the children learn how to save their own seeds and create a seed bank to support the garden.
  • Planting Orchards: Help start a family orchard in which the children can raise, tend, and harvest fruit and nut trees, for both family consumption and resale. If the business develops, help the kids to participate in a local farmers market or roadside stand.
  • Summer Language Lab or Trip: Make it possible for a child to live and study in other countries over the summer so that he or she learns a second language and becomes familiar with other cultures. Encourage and prepare children to work and live globally in order to take advantage of the full range of opportunities. Many high schools and most colleges sponsor or participate in programs for study abroad for a year or semester.
  • Going Global Locally: As a first step before going abroad, try going global in your own backyard. Many of us live in areas of the country that enjoy rich diversities in family history and background. Find opportunities to organize children and parents of different backgrounds and cultures to tell stories and teach about their histories, cuisines, languages, and traditions.
    It is amazing how much we can learn about the world simply by sharing the richness of our varied histories and heritages within a school community or neighborhood.
  • LivestockRaising Farm Animals and Livestock: Fund a flock or herd of farm animals and livestock that the child can tend and raise for resale, competitive showing, obtaining fiber for weaving
    or knitting, and/or providing food for the family.
  • Sewing: Buy a sewing machine and sewing instruction for an interested child. Knowing how to sew is a good skill to have within a family. It can help generate income and is useful for children who are interested in theater and the fashion and apparel industries.
  • Amateur Radio: Help children learn how to build and operate ham and amateur radios. It will put them in touch with a variety of people and places around their region and the world, give them a skill that can be enormously useful in severe weather and natural disasters, and may help them qualify to work with local emergency responders.
  • Apprenticeship: Help arrange a mentorship or apprenticeship with an adult who has expertise in an area of the child’s interest (e.g., a chef, an architect, an engineer, or a ship's captain). This can create valuable experiences for both the mentor and mentee. Many trades are in danger of becoming lost arts, such as boat making, saddle- and harness making, clock making, stone carving, artwork restoration, tromp l’oeil painting, metal gilding, cake decorating, woodworking, and many more. These provide excellent areas of opportunities for an interested child.
  • Energy Self-sufficiency: Learning about solar energy, geothermal energy, generators, biofuels, and other forms of alternative energy is time-consuming. Find out which of the teenagers
    in your family is passionate about these things, and pay for him or her to access the books and training needed to become proficient in that area. He or she can then lead the family in
    learning how to become more energy-resilient and to integrate alternative energy in their homestead.
  • Computer skillsComputer Skills: For children in high school, having a good computer and the time and training to develop skills in a variety of software packages can help with their education as well as provide part-time moneymaking opportunities. Computers also make availablr tool and database access for investment and economic research.
  • Astronomy: The opportunities in space and space travel are growing, so it is not surprising when children take a great interest in what is happening in the stars and planets around us. Helping children learn about astronomy, how to navigate by the stars, and how to use various navigation instruments provides them with an invaluable set of skills.
  • Fiber Arts: For youngsters interested in weaving, knitting, and other fiber arts, a spinning wheel or spindle can be turned into a way to generate income. Fiber arts classes and guilds are a way to hone skills and meet others with common interests.
  • Bike, Auto, and Small-machinery Mechanics: Why shouldn’t children know how to repair and take care of cars, bicycles, and the equipment and appliances that most of us use? The answer is—they can. Why not fund the purchase of tools and a secondhand bike and old car for a child to take apart and put back together again?
  • Construction: If they have the interest, there is no reason why children cannot learn how to do basic home construction and repair by the time they have graduated from college. These are great skills for any career that involves project management, as well as real estate development and infrastructure engineering and construction—not to mention coming in handy for
    summer jobs. A great way to start could be to hire a contractor to do work on the homestead on the condition that the contractor will agree to use one or more of the children on the job.
  • FishingHunting and Fishing: Hunting and fishing, as well as learning how to handle firearms, are great skills for children interested in learning how to live on the land.
  • Summer Work Experience: As an alternative to camp, a farmer in Ohio provides summer work experience to groups of children. Reportedly, a former governor’s children participated in this program. Similarly, it is possible to spend part of a summer working on a ranch out west. An even more powerful experience would be to combine this work with some type of learning about how the money works in the ranch or farming operation. Alternatively, one could provide seed capital for investment in the type of commodities produced at the farm or ranch.
  • Outward Bound: One of the best ways for children to learn how to deal with problems and stress is to train for them. Outward Bound is one such program, both in the United States and in other countries.
  • Permaculture Certification: Fund a child to learn about and become certified in permaculture. This could be combined with a funding a trip to Australia or some other area where permaculture has flourished or by supporting a college-aged student’s time WWOOFing.

Providing gifts to fund a college savings plan is a great idea. However, it is a shame to see that money sitting in corporate and government securities for long periods of time when it makes more sense to gift that money now as an immediate investment in the children we love. This applies to building practical skills as well as to more formal education.


Education

As the cost of formal education grows, many families are limited by economic considerations in what they can provide for their children. This is of concern particularly as public schools, despite good principals and teachers, become subject to more invasive federal rules, regulations, and collection of data on students.

Gifting to a child could include providing sufficient gifts to parents so that one parent can afford to home school the children. If home schooling is not possible, perhaps you could support attendance at a private school. If private school is also too invasive or expensive, perhaps tutors to supplement the children’s education can be engaged. Where a home environment cannot be stabilized, other options may include funding a child to go to boarding school or to live with another family or relative, and attend school away from their immediate family.

When it comes time for college and graduate school, helping a child achieve an advanced education without the burden of student loans is an excellent investment. Enabling young people to make career decisions according to what is in their hearts instead of what is necessary to repay student loans is a gift of immeasurable value.


Financial Literacy
Supporting children to become literate with money as well as with financial, economic, and investment concepts helps them to navigate a world increasingly characterized by economic warfare.



Examples:

  • Teaching: The initial step in preparing anyone for a financial learning journey is to help him or her become conversant with introductory terminology and concepts. Contributing time to creative projects geared toward getting a child comfortable with these concepts is a good investment. One of the things I like to do is help interested children create a taxonomy of the knowledge in a specific domain, identify how this knowledge relates to their lives, and develop a learning plan for mastering topics of interest. 
  • DVDs/Books: Children need access to the books and videos that can help them understand economic issues. Some of the materials I give to teenagers include the video Maxed Out (to teach the dangers of credit cards and debt), Rich Dad, Poor Dad by Robert Kiyosaki (to help them understand the cultural habits that build financial wealth), The 7 Habits of Highly Effective Teens: The Ultimate Teenage Success Guide by Sean Covey (to help them understand good work and living habits), the World Almanac (for an overview of global asset- and population statistics), and a good atlas to provide them with maps of our planet.
  • TutoringHome Schooling and Tutoring: Home schoolers have used my Economics 101 curriculum and Solari audio seminars, including Catherine’s interviews with Franklin Sanders, Investing in Silver and Gold Coins and Building Real Wealth, to learn about precious metals and how to detect entrepreneurial opportunities in their daily lives.
  • Community Questing: A community quest can be a “treasure hunt” that helps you learn about the history and nature of your community. Understanding the history and natural resources of a place is critical to understanding the economy of a place. Each community is a microcosm of our planet, so lessons about the local economy are essential building blocks for helping a youngster understand regional, national, and global economics.

The best way for a child to learn basic economics and investment is by doing: starting a summer business, making a loan, buying a stock, making a donation, and so forth. So, while supplementing action with financial education is helpful, there is nothing like real-life connections, actions, and transactions to help a child understand how to build real wealth.


Entrepreneurship
The key to business success is in learning how to provide a useful product or service at a competitive price while covering costs. For many children, their first opportunities to make money come from helping neighbors with household chores. This includes everything from babysitting to household repairs.

In order to convert these opportunities into a “business” that they can do after school or in the summer, children sometimes need help funding basic tools.


Examples
:

  • Gardening and Landscaping: Gifting or loaning a lawn mower, weed-eater, and other tools useful to lawn and gardening services could help children create their own business to generate income at a relatively young age.
  • Apprenticeships: Working for a local company provides a child with lessons about issues one is likely to encounter in running a business. If members of the local Chamber of Commerce, Rotary Club, or business community were so inclined, they could provide a rich learning experience through a community-wide apprenticeship program in which the community’s young people would rotate through a variety of small businesses.
  • ClassesClasses: Classes on accounting, tax preparation, and small-business law are widely available at local technology schools and trade schools and at community colleges. Such classes can open up future employment or entrepreneurship opportunities for teenagers and young people and provide them with inspiration and a leg up for higher-level business school at a later date, if they choose that route. There is no need to wait until college or graduate school for children to be introduced to these skills.
  • Equity investment or loan: Rather than funding the lawn mower or tools in the form of a gift, an adult’s contribution to a youngster’s business could be structured as an equity investment or loan to help the child learn about business finance. I have an aunt whose father was a farmer. He would make loans to her and her brother at the start of the growing season for funding their seeds and equipment to plant their own acre. They had to work out all the mathematics of the planting, growing, and harvesting, as well as the loan calculations. My aunt has never forgotten these first lessons in entrepreneurship, and the dangers of assuming that debt can be paid back from variable income that is subject to the risks of unpredictable weather and commodity prices.


Investment
The subject of investing encompasses a host of disciplines, skills, and experiences that no one individual can hope to master in a short course. The key to developing future mastery over a period of two or three decades is to afford a young person assistance in identifying areas of personal interest, and relating those to local or global investment opportunities in a manner that will illuminate the pathway to a desired goal. It is best to start with simple investments and build from there.

A monetary gift can provide seed capital for a child’s personal investment account. Combining this with a financial learning journey on how to invest can form the basis for a long-term project as part of helping the whole family build wealth together. Parents and siblings can be inspired to participate themselves when they see positive results from the efforts of a young family member. Thus, one way to help adult family members is to teach them through the education of their children and siblings.



Examples:

  • Precious Metals: The purchase of gold and silver coins is an ideal initial long-term investment. Investing in coins can involve a child in understanding currency and inspire him or her to learn about the history of currency. Graphing the price of gold and silver against U.S. dollars, other commodities (such as oil), and other currencies can be a great lesson in international finance and the effect of monetary policy on the value of the national currency. For this purpose, is vital to introduce children to various sources of reliable information and commentary. Financial websites such as Yahoo Finance, GATA.org, The Moneychanger, and Bloomberg (see links at the Solari blog); segments of the Solari Report; recommended reading; and relevant movies can all contribute to to their learning. As time goes on, the youngster can begin to distinguish between trustworthy educators and journalists versus those who merely repeat a timeworn mantra of questionable value.
  • CD at a Local Credit Union, Coop, or Bank: When a child’s investment is made in a financial institution CD, an adult sponsor may arrange for a representative of the institution to give a presentation describing where deposited money has historically been invested, the forms in which the institution’s investments have been made, and what such investments have helped accomplish in the community. Then the sponsor can engage the child in a field trip in the community to see whether the claims made by the financial institution are valid. As a lesson on the value of impacting our world by voting with our money through making wise investment choices, the sponsor, or other assisting adults, may support the child in doing further research on what centralized financial institutions do differently from other types of financial organizations. (For example, draining the community of the value of local deposits; taking market positions and implementing credit policies that destroy small businesses and family financial well-being; engineering government programs such as food stamps to their benefit.) The child might be encouraged to imagine a different world in which financial institutions were conducted in a manner that builds wealth within the child’s community. Alternatively, one might arrange with the local financial institution to make and service loans that a group of kids guarantee with their CDs as collateral. That way, over time, the kids can learn to make loans themselves and see what happens when there is a default.
  • Collectibles: Collectibles may present an opportunity to the extent that the donor or recipient has, or would like to develop, an expertise in a specific area, e.g., stamps, comic books, baseball cards, and so forth.
  • Solari Circle: Organizing a Solari Circle for Kids offers a means to teach financial concepts in a group setting, especially useful for home-schooled children or in a school-sponsored club setting led by an adult volunteer. Here are some ideas of what a Solari Circle for Kids might accomplish with the assistance of one or more strong adult facilitators:
 
  • A Group "Hand": Essentially, a Solari Circle agrees to an amount that each member will put into the pot each time the members gather. So, if there are five children in the Circle, and they agree to put in $20 each month, that is $100 each month with which they can:
      a. arrange for one child to take the pot and determine what to do with that month’s money. Ideally, this helps children learn to save.
      b. sign up for The Moneychanger's monthly gold and silver coin acquisition program (as long as the group is not based in Tennessee, where tax laws make such a program uneconomic for residents). Each month, one child takes the coins.
      c. build up an investment pool that the group uses to make local loans and investments.
  • Simulated Portfolio: An exciting simulation experience can be had through the creation and maintenance of a phantom investment portfolio on Yahoo Finance or by using similar software. This enables children to watch companies' stock performance. For example, they can choose companies that they are familiar with or that produce product the children use; various local businesses; businesses that provide services or products that dovetail with the children's hobbies, interests, or career pursuits; companies based in other continents that the children are studying. Activities could include comparing the performance of U.S. companies to that of companies based in other countries, including observing what happens to share prices when major news developments occur. This exercise helps children understand the dynamic relationships in the economy—between governments and businesses, between institutions located in different regions on the planet, and between consumer products and the investment community. It can also make them aware of the competition for resources that leads to economic warfare and war, as well as the tensions that exist between investor return and corporate and governmental responsibility.
  • Participation in Local Political Process: Understanding the local political process and how it relates to the creation of rules that affect the local economy is one aspect of understanding the investment process, not only in the United States but globally as well. Participating in a local campaign, attending local city council, zoning board, and similar public meetings, and reviewing public budgets and legislative decisions can be enormously instructive for understanding why and how decisions that affect everyone in the community are made.
  • Stock: The best stock to buy is one in an enterprise of particular interest to the child. For example, for a child who loves football, it might be stock in the Green Bay Packers (which is a publicly traded security). For a child who is into computers, it could be shares in Apple. For a child interested in clean technology, it could be a fund that specializes in investing in stocks of companies that use new technology to help us reduce our environmental footprint. The idea is to open a discount brokerage account (such as at Charles Schwab) in the child’s name and help the child select and purchase stock. The donor or another qualified adult can teach the child concepts of financial and corporate governance and social responsibility, using publicly available quotes and the company’s annual report and proxy. In the process, the child could learn about financial reporting and how to research publicly available information. Ideally, it would be most instructive for the child to attend the company’s annual meeting, vote the proxy, see how the board and management function in relationship to shareholders, and find out what issues are addressed at an annual governance meeting.


Arts & Music
The opportunities to encourage a child’s artistic and music skills are endless. Given the increased cutbacks in these so-called noncore subjects in school budgets, there is ample room for private gifts to have a major impact. The creative skills developed through active participation in the arts are valuable throughout our lives, including for numerous business and investment pursuits.


Examples:

  • Music lessonsMusic and Singing Lessons: Helping a child to learn how to play a musical instrument or to sing is something that can be part of the everyday schedule or can be combined with immersive experiences. For a child who has trouble making friends, group lessons might be just the answer.
  • Performing Arts: Nothing prepares kids better for adult leadership roles than learning at a young age how to stand up in front of a group of people and effectively share what they know or enjoy doing. Hire local performers to organize a community theater that showcases children doing stand-up comedy, storytelling, improvisational dance or theater, dramatic readings, skits for local fairs or community benefits, open-mike nights, and other performance art.

I asked one of my favorite artists for ideas on how to integrate support for a child’s artistic skills with involvement in the community. Here were some of the projects she suggested:

  • Paint a Concession Stand: Invest in hiring an artist (or find a willing teenager) to acquire a commission for a group of children to paint a concession stand at a swimming pool or zoo. The kids can show the concession owner a few sketches of appropriate images—ice cream cones, hamburgers, whatever the concessionaire is selling—to help increase the stand's business. Once they are approved, the artist can guide the children in working together to complete the project.
  • PaintingPaint or Tile Murals: Hire an artist to lead a group of children in painting a mural for a school corridor, a home hallway, the building facade of a local business, the wall of child’s room, or a church wall. The artist can draw the mural and mentor the children in painting it. With help, children may design and produce a tile or mosaic wall in a zoo or park. The gift-giver can purchase tiles and grout and hire a ceramist who can teach kids to glaze and fire the tiles and apply the mosaics. The community will then have a permanent art show. Throw a party in the park to celebrate, or unveil the finished work on Earth Day.
  • Paint Furniture:  Find furniture at a rummage or garage sale and hire an artist to (or have a talented teenager) provide an outline for children to color in the patterns with paint. Buy secondhand wood-and-cloth chairs or lounge chairs that an upholsterer can reupholster with cotton duck, creating a paintable canvas. Pillows covered with white cotton can be painted upon as well. The finished items can be given to less fortunate families, used in the child’s home, raffled off at a charitable fundraiser, or even sold at a profit, either to an existing business or directly to end users.
  • Art Contest at a Pet Store: Invite kids to come in, sit on the floor, and draw or paint the pets. The pet store can then make a window display of the art and award a prize, perhaps a pet bird or rabbit, if the family is able to take on the responsibility. This will draw more customers to a local pet store's business.
  • Art on the Farm: Hire an artist to teach children to draw and paint the farm animals that the children are raising. Hold a special event to show the finished artworks (with or without the animals) or combine it with another event, such as a rodeo or a sheep and wool festival, where the children will be showing their animals.
  • Art Activities at Hospitals: Give a few talented older children art supplies in exchange for their commitment to provide birthday parties for patients at a children’s hospital at which friends and other patients can engage in artistic activities.



Stewardship
It is critical to instill a sense of responsibility in children by helping them understand how they can contribute to the betterment of the world around them by being good stewards of their resources, which includes the practice of gifting or tithing. We should never allow our children to feel powerless to make a difference. Instead, we should guide them to understand the people, enterprises, and systems around them and look critically for opportunities to make a difference.

Stewardship may be taught by involving the children we love in helping us with our decisions about what and how we donate within the family and community. One might, for example, give a young family member responsibility for directing and managing a portion of the family’s donation budget.

 

Examples:

  • Popsicle Index Challenge: The Popsicle Index is the Solari "rule of thumb" for the health and well-being of a place. It is the percentage of people in a community who believe that a child can leave their home, go to the nearest place to buy a popsicle or other snack, and come alone safely. Phi Cubeta, the proprietor of Gifthub.org, who holds Sallie B. and William B. Wallace Endowed Chair in Philanthropy at the American College, suggests that we might divide a child's allowance into three parts: one portion for discretionary spending or saving, one for investing, and one for giving. Why not invite the children in your life to organize their investments and donations in a manner that identifies and exploits opportunities to improve the Popsicle Index in their community? This, of course, begins with engaging in a process to understand what makes the Popsicle Index goes up and what makes it go down, and how that relates to the flows of financial resources in our communities.
  • Microloans: For children with computers, provide a credit for loans to entrepreneurs in other countries through Kiva.org. Such a loan does not carry interest, but it is a good way to learn about small businesses and entrepreneurship around the world and to share the lending experience with other investors from both the United States and other countries.
  • Gifts to Schools: My attorney gave a glockenspiel to her son's public elementary school seven or eight years ago, and the music teacher still raves about it. Funding a field trip for a class in public school with a tight budget would enrich the lives of many children and support and energize its teachers. Such a gift could encourage other community groups to follow suit. A key part of the success of Walnut Hills High School, an inner-city Cincinnati college-prep high school rated this year as #36 of all public high schools in the country by test scores (according to the U.S. News and World Report “Best High Schools” list), is due to the involvement and generosity of its active alumni foundation, parent board, and various booster clubs. In a school district with scarce funds, teachers at Walnut Hills are able to obtain funding for special books and other school-provided supplies, via requests to the onsite alumni foundation office.
  • Mission/Service trips: Funding trips abroad to serve as part of a church or other charitable group could be combined with or preceded by foreign language instruction. Some high schools offer such programs during school breaks ans summer vacations. Or a child who plays a musical instrument or is an active choir member could be supported to take advantage of a foreign touring opportunity that his or her parents cannot afford.
  • Caring for Animals: Many children love animals and would be interested in programs that protect and care for wild animals and birds or that help abandoned or stray animals and livestock.
  • Helping Friends: Children often have friends with special needs. Discreet intervention to help these friends or their parents can make a big difference at important times and would be a gift for your children as well.
  • Community Organizations: Our communities are full of organizations that make a significant difference in our quality of life. Helping children to understand how the donation process works in these organizations—such as churches, food banks, libraries, and homeless shelters—allows our children to recognize the critical role these play in our communities and economies.
  • Advisory Board: Does your business tithe, donate, or have a charitable foundation? Do you run or participate in an active organization in your community? Why not add young people to your advisory board or other committees to bring in a new, fresh point of view while you help them aquire real experience. Perhaps you can join with children in your place for an expanded Popsicle Index Challenge!


The Whole Family
Sometimes helping a child we love means supporting the child’s parents. Most parents would love to provide their children with every possible opportunity. However, parents are now raising children during a period of falling income and rising expenses, and many parents are unemployed or underemployed or experiencing cuts in pay or benefis. Successfully raising children in this environment requires a much greater investment of time and money and greater risks than originally anticipated.

In these circumstances, it behooves all members of the family to appreciate the responsibility parents are taking in raising the next generation, and helping when and as we can.

One of the critical issues for a child is a stable home environment. Where sufficient financial wealth is available in an immediate and extended family, refinancing a family mortgage or helping a family finance the purchase or rental of a new home subsequent to foreclosure or other loss may be an important step toward creating a stable home base for the children. This is a significant commitment for one family member alone. However, in families where a number of members are willing to participate by syndicating the mortgage or loan among themselves, such investments become easier to afford. Given what is happening in the economy, families organizing to invest in housing for members of their family who are having business or health difficulties can be a sound investment in both real estate and for current and future generations.

Our favorite book on family wealth, Family Wealth—Keeping It in the Family: How Family Members and Their Advisers Preserve Human, Intellectual and Financial Assets for Generations by James E. ("Jay") Hughes, Jr., puts forth the concept of a family bank, where members of the family dedicate a portion of their savings to gifting and investing in family members’ dreams and business ideas. This is terrific because it combines the knowledge and networks of numerous members family for the purpose of building one another’s success. You can hear Jay describe this idea on our Solari Report Digest #6.

Whatever the particulars and opportunities in your family, supporting the children we love invariably requires involving and supporting the whole family. Reducing a parent’s stress lightens the burden of the child; and a child whose needs are satisfied is a child whose parents are less stressed and better able to parent effectively than they would otherwise be.


US Federal Taxes
Nature of Gifts and Applicability of Gift Tax

Unlike income taxes, the federal gift tax applies to donors of gifts, not the recipients. Because of the interrelationships among the gift tax, generation-skipping tax, and estate tax, the assistance of a knowledgeable estate-planning expert is important, particularly for multimillion-dollar estates and for couples who have remarried and have children from earlier marriages. The following summary is limited and is not a substitute for individual tax and estate-planning advice.

A “gift” is the transfer of value by a donor that is not in exchange for something of at least equal value from the recipient. Thus, a transfer to or on behalf of an employee in exchange for labor cannot ever be treated as a gift for tax purposes. Excluded from federal gift tax are gifts to charity, to political organizations, to spouses who are U.S. citizens, and for medical or educational expenses that are paid directly to medical or educational institutions, as well as gifts within the annual exclusion or lifetime unitary estate and gift tax exclusion ($3.5 million in 2009). Gifts within three years of the death of the giver are part of the gift-giver’s estate. Note that different rules apply to gifts of future interests and gifts to spouses who are not U.S. citizens.

Gift Tax Law Uncertain at the Beginning of 2010

The federal estate and gift tax provisions are in flux as of this writing (January 2010). This is because the Bush-era law in effect from 2001 through 2009—which, among other things, lowered the estate and gift tax rates—expired on December 31, 2009 and, contrary to most expectations, the Senate took no action on estate and gift tax legislation before the end of the year.

House Bill H.R. 4154, which passed in the House in early December, would have extended the 2009 estate and gift tax rates for years after 2009. But the absence of definitive Congressional action before the end of 2009 has resulted in a reversion to pre-2001 law.

The legislative process for a new law may begin anew in the 2010 legislative session. It is anybody's guess what, if anything, Congress will do in 2010 to remedy a current tax situation that probably is not satisfactory to any political faction: Under current law there is no estate tax in effect for deaths in 2010 but for years after 2010, the estate and gift tax rates increase.

2009 and Current Gift Tax Provisions

The tax rate for taxable gifts in 2009 was the same as the inheritance tax rate—that is, 45%. Barring legislative action to prevent the reversion to pre-2001 law, the gift tax rate decreases to the highest individual income tax rate (35%) in 2010. In Internal Revenue Bulletin 2009-50, released November 9, 2009, it was announced that the 2009-level annual exclusion would be retained for gifts made in 2010. Thus, in order for a gift-giver to qualify for the annual federal gift tax exclusion in 2009 and 2010, a gift from a single taxpayer to a single recipient cannot exceed $13,000 in a single tax year. A married couple can give a single recipient up to $26,000 without paying any gift tax. The annual exclusion is indexed to inflation, so it may increase in future years.

Gifts during 2010 above the annual exclusion amount apparently fall within a new lifetime gift tax exclusion of $1 million (which replaces a unitary gift and estate tax exclusion effective through December 31, 2009, of $3.5 million). In 2011 and beyond, the estate tax will be reinstated with a $1 million unitary estate and gift exclusion. The maximum tax rate for both estate and gift tax purposes will be 55%, plus a 5% surtax for estates between $10 million and $17.184 million. But this surtax is intended to eliminate the effect of marginal tax rates, so the result is an overall effective rate of 55%.

Because of the interrelationship between gift and inheritance taxes, it is extremely important for the gift-giver to keep detailed records of gifts among his or her tax records, even if the gifts are subject to an exclusion. For more information on federal gift taxes, see IRS Publication 950 Introduction to Estate and Gift Taxes. For a June 2009 article by the law firm McDermott, Will & Emery on the current estate and gift tax situation plus various earlier proposals, political positions, and issues, see Legislation Affecting Federal Estate and Gift Tax.

State Gift Taxes and Basis

Most states do not have gift taxes, but a donor living in Connecticut or Tennessee, for example, must look to state law to determine the applicable annual and lifetime thresholds for state gift tax purposes. While many states (North Carolina, South Carolina, Delaware, Louisiana, and New York, to name a few) have repealed their gift tax provisions in the past decade, recent and severe state budget deficits may result in the reinstitution of the gift tax in the future.

The recipient’s basis in a non-monetary gift is the basis of the donor in the gift, so a gift of precious metals, for example, may require the recipient to pay significant capital gains taxes on their sale. The gift tax, however, is paid by the gift-giver, not the recipient.



Summary 

 We live in a world of increasing risk. The family is the most successful risk-management organization created by mankind. Yet many of us have experienced families that have been torn apart by geography and divisions in our society. We have fallen into the trap of believing that financial assets and insurance can buy us safety without family and community.

“I am estranged from my family,” some of you have written to me to say. Truly, I understand the challenges. Please open your hearts and minds to one simple fact—family wealth is the building block of healthy communities, which are, in turn, the building blocks of healthy economies and civilizations.

Look around your community or county. What is working? Whether it is a high-quality local grocery store or an effective local arts council, you will find that its history started with the hard work and funding of a great local family. Despite all the harm done by government programs and corporate encroachment, the health of your place reflects the tenacity and courage of local families whose history is deeply rooted in your community.

If our economy and democracy are to revive, millions of individuals will need to turn failure into success. This means that if you want to save the world, I vigorously recommend helping members of your family. And that begins with protecting and nurturing the children.

For some, this will mean supporting children within your immediate family. For others, it will mean supporting the efforts of local families who make an important difference to the children in your community. And for some of you, it means incorporating a vision of family wealth and investing in children as you create your proposals for reviving our culture and economy.

We are at a watershed in the history of our society. Our governmental and corporate leaders are shifting our investments in human and intellectual capital to benefit only a small portion of our young people. My vision of the future is much more optimistic and abundant. These times call for a renaissance of learning and skills by diverse networks of people, for more broad-based innovation, and for diversified, emergent solutions to the challenges ahead.

For that to happen, we are all called upon to shift our capital—whether our time or our money—out of untrustworthy systems and into nurturing ourselves, our families, and the children we love. It is time to reaffirm that we and our families, not our financial capital, are the valuable assets in our communities. Our financial capital is merely a tool to serve and give life to our families, our dreams, and our enterprises.

During this holiday season, the Solari team and I give thanks for you and all that you are doing to support the children in your lives and your communities. By nurturing the children you love, you are building a much more powerful future for all of us.

May the new year be one of blessings and prosperity for you and yours. May we grow a great civilization together—one family and one child at a time.


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Catherine Austin Fitts is president of Solari, Inc., publisher of The Solari Report
, and managing member of Solari Investment Advisory Services LLC in Hickory Valley, Tennessee.

Catherine welcomes your comments as well as ideas or stories about gifting to children that you would like her to share. Please send these to communicate@solari.com.