Rich Face Dilemma As Year Comes To An End

Even though the estate tax has been in a flux for the past decade, only the most recent uncertainty about the estate tax has forced thewealthiest individuals to face a difficult dilemma. Should they make agift to take advantage of the lifetime gift tax exemption or should they holdon to their assets? Either choice has a its own benefits and disadvantages.

The benefits for making a lifetime gift are obvious. This isan excellent opportunity to make transfers of wealth to another person withoutincurring a tax on the transfer. For example, a person could wait to bequeathmoney to their favorite relative through their will, but it will likely incur atax on the transfer of wealth because of the gift tax. If a person chooses tomake that transfer before they die and utilize the lifetime gift tax exemption, the onlymoney that the person loses is the money made in the transfer. The disadvantagehere is a little less known. If the transferee decidesthat he or she wants to sell the asset, then the transferee will incur a tax onboth the value of the transferred asset in addition to a tax on the assetsappreciated value. If transferor bequeaths the asset, then the transferee willonly incur a tax on the appreciated value of the asset from the time of thetransfer. 

See RobertonWilliams, Give Now Or Pay Later: Rich Face Dilemma With Fate Of Estate And GiftTaxes Up In Air, Forbes, Dec. 17, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.