Wealthy Americans Hesitant to Take Advantage of Estate Tax Break

The 2010 estate tax break, set to expire in 2012, left many wealth advisers with the assumption that the richest Americans would quickly take advantage of the additional tax free gift allowance. It appears, though, that many of these Americans are hesitant to make additional gifts, fearing that a windfall may act a disincentive for their recipients to continue working. Another reason many wealthy Americans are hesitant to take advantage of the tax break is a fear that the economy could weaken again in the future, leaving them in need of the money.

When a couple does decide to make a tax-free gift, they should spend a substantial amount of time deciding how they want the recipients to receive the gift.

Some individuals who fear giving too much money to their recipients have included incentives in trusts as a way to ensure the recipient does not receive and unjust windfall. Others have named a spouse as a beneficiary as a safety valve to prevent the couple from running out of money.

See Paul Sullivan, Wealthy Hesitate to Take a Break on Estates Taxes, New York Times, May 13, 2011.

Special thanks to Jim Hillhouse (WealthCounsel), and Joel Dobris (Professor of Law, UC Davis School of Law),  Naomi R. Cahn (John Theodore Fey Research Professor of Law, George Washington University), and Barrett Shipp (Attorney at Law, San Antonio, TX) for bringing this article to my attention.