Views & Analysis from our Experts

Time to Look the Gift Horse in the Mouth

Do you want the good news or bad news first?

The good news is that we see a rare combination of factors that makes it a good time to gift—high exclusion, low valuations, use of lending (at low rates) to amplify the gift, defined value gifting—but the window is short.

In more good news, the recent Wandry decision in Tax Court helps simplify the gifting process.

The bad news is that the Wandry decision is currently up for appeal. We’ll have to wait and see if it holds. The other bad news that you already know is that the current tax laws are set to expire in 2013, meaning the estate and gift tax rates could rise significantly next year.

Here is the crux of it:

1) Through the end of this year, a person’s life-time gifting can be up to $5,124,000. If married, this is $10,240,000 in gifting.

2) For folks with significant estates, this is an unprecedented opportunity.

3) We don’t know what will happen, but the tax laws are set to expire after December 31, which would drop the exclusion back to $1,000,000.

Couple that with a few other facts:

1) The AFR (Applicable Federal Rate) is near an all-time low. There are techniques that allow you to sell or borrow and take advantage of these low rates.

2) The recent court case of Estate of Wandry v. Commissioner simplified the process of gifting by allowing defined value gifts (i.e., some number of units worth $X, with the number of units to be determined at a later date in time). This takes out some of the uncertainty and allows you to execute a gifting plan as designed.

The gift of time is running out on low gift tax rates, so now is a good time to start the conversation with your team (your accountants or lawyers).

For more information on how to gain control of your gifting opportunities, contact Seth Webber or your BerryDunn financial advisor.

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