Home » Article » Pay Attention to Your Gifting – Opportunities for Tax Savings

We are nearing the end of the year, and the clock is ticking on important estate planning decisions that must be made before year-end. One of the most important is whether to take advantage of a gifting program to help minimize estate taxes.

The estate tax rate for persons dying in 2008 is 45% of decedent’s assets in excess of $2 million. Next year, the estate tax rate will be 45% of assets over $3.5 million, and the current thinking is that Congress will not increase the $3.5 million level at the end of 2009.

Congress allows us to minimize exposure to estate taxes in many ways. One of the most effective methods to minimize exposure is make gifts during your lifetime using your annual exclusion ($12,000 per person per year) and your $1 million lifetime exemption. Making such gifts is easy; leveraging your gifts takes planning. With the low interest rates in effect now, you can effectively pass more value by way of gift than the limits stated above. For example, fractional gifts of property will leverage your gifting power and pass more wealth to the next generation than gifts of cash. But leveraging adds complexity and often requires the use of entities such as trusts, partnerships, or limited liability companies. Leveraging also requires appraisals of the property to be gifted. If two years worth of gifts are made at the end of one year and the beginning of the next, the same appraisal may be used for both sets of gifts, reducing cost to you.

End of year planning makes sense, but it takes time. If you wish to take advantage of these opportunities, please call our estate planning group now to schedule a meeting to discuss your options.