From the standpoint of estate and tax planning, involving cash gifts between individuals, or between individual and organization, the process is known to follow a familiar legal and rule-based framework. This process is well-known, accepted and hardly questioned when it is conducted according to the standard precedent.
As a contrast, when cash gifts are conducted following the same rules, limits, etc. outside of the estate and tax planning framework, there appears to be a very disparate mental approach to the ideas of how cash can be distributed between individuals.
Initially, a legal and rule-based process entitles legitimacy for handling of those assets for those of substantial or of sufficient financial means. Professional advice is acquired and used as a normal consequence of participating according to the rules. However, outside of this familiar context, the exchange of personal gifts carries a penalty of suspicion, and, in a few states, including Iowa and Kentucky, actual penalties under specific circumstances.
Mentally and structurally, those who seek to examine gifting activities outside of tax and estate planning scenarios are involved first in a balance of the possibilities, both right and wrong, in the array of available programs, systems, etc. This examination scenario then follows with a breaking down of a significant mental barrier of a different type, a barrier that is key to the gifting concept – that one gives first, initially for the benefit of the recipient, as an act of faith, and, as a means of attraction from others who have developed the ability to break through the same barrier. Honestly, the idea of releasing hard-earned assets goes totally against all that we are taught. We are taught that non-organizational, benevolent giving is frequently a basis for fraudulent activity, and that ‘if it looks too good to be true, it probably is.’ However, benevolence is a learned behavior, or not one that is necessarily natural for many, and is and should be expected to be the primary motivator. Without it comes the need for scrutiny and suspicion, based upon the history of previous abuses in some not so well-intended approaches historically.
Naturally, or perhaps, incredibly, in light of the characteristic of suspicion otherwise, there is an entirely different perception that under estate planning rules, a win-win is the goal of all participants, unquestionably. Estate and tax planning in itself is a perpetual exercise in win-win, to treat the tax laws fairly, while seeking the best outcome for the management of ones personal, appreciated and acquired assets.
It is totally up to those who participate in all gifting, and particularly for purposes not involved in estate planning, to scrutinize the motivations, the processes and programs that exist, to insist that ethics and laws are respected, and to maintain reasonable expectations with regard to what can or should happen as a result of any participation.