A Good Time to Give

With so much uncertainty surrounding the future of the estate tax, many financial advisors are now encouraging clients to avoid the tax all together by making wealth transfers to younger generations now. Interest rates for many estate planning strategies are at all time lows, and for the remainder of this year a client can give away up to $5.12 million ($10.24 million per couple) without incurring a gift tax of up to 35%. The current $13,000 gift exemption per recipient per year ($26,000 for spouses giving jointly) can give clients a head start on their wealth transfers before they even beginning dipping into their gift tax exemption.

GRATs can help tax-free transfers go even further by allowing assets to appreciate while providing an annual income stream to the client for the trust’s term. Portability is another estate planning tool clients can take advantage of to increase their wealth transfers. Portability allows a surviving spouse to use his or her own $5.12 million limit along with any unused portion of the deceased spouse’s limit. Portability is set to expire in 2013, however, unless Congress acts, so this estate planning tool may not be around for much longer.    

See Deborah L. Jacobs, Tax Pros Tweak Advice About Big Gifts to Family, Forbes, Jan. 10, 2012.