Using Quiet Trusts for Giving in 2012

Many people are aware that the current federal gift and estate tax exemption of $5 million is scheduled to revert to $1 million at the end of 2012. Not only is the exemption set to drop, tax rates are slated to increase from 35 percent to a range that tops out at 55 percent. This means that a single person who makes a $5 million gift on December 31, 2012 would owe no tax. That same gift made on the very next day would result in millions of dollars in tax due. This combination of unhappy tax consequences makes a compelling case for those giving property away before year end. But, some have hesitated, believing that access to significant wealth could hinder the development of a strong work ethic in their children or grandchildren. One tool available to address this issue is the New Hampshire “quiet trust.”