Tax and Estate Planning Update

The two-year window is closing on opportunities for families to capitalize on gift, estate, and generation-skipping tax provisions of the 2010 Tax Act. In this 2012 Financial Executives Forum session, Susan von Herrmann, a partner in Schiff Hardin’s private clients and trusts and estates group, looked at gifting strategies in light of the Act's impending expiration. 

• Extension of 2012-2013 rate and exclusion -- $5M gift tax exclusion and a 35% rate
• Restoration of 2009 law -- $1M gift tax exclusion and a 45% top rate (gifts greater than $1.5M)
• Congress does nothing (likely in an election year?) -- $1M gift tax exclusion and rates of 41%-55% (gifts greater than $3M)

• Gift tax is cheaper than estate tax.
• 2012 is likely the best gifting environment of all time
  - Gift tax exclusion= $5,120,000 ($10,240,000 per couple)
  - GST tax exclusion= $5,120,000 ($10,240,000 per couple)
  - Gift tax rate= 35%
  - Low interest rates means low hurdle rates for leveraged and split interest gifts (generally favorable)
  - Short term GRATs, use of valuation discounts and dynasty trusts still permitted
• Everyone should have a gifting plan.
• It is wise to start with the easiest/lowest impact gifting (annual exclusion and tuition and medical exclusion gifts) and progress to more permanent and complex transactions (leveraged and split interest gifts, gifts that require paying some gift tax) in your planning
•  An individual who does not act this year may be giving up the ability to transfer up to $4,120,000 free of transfer tax

Download the full presentation to learn more.