Monday, October 22, 2012
As I have previously discussed, the deadline to decide whether a client should take advantage of the lifetime estate/gift tax exemption is fast approaching and many potential clients have opted to take advantage of this once in a lifetime opportunity. Some clients have gone through great lengths, even borrowing money from banks "so that they can make big gifts before year's end." Many financial advisers are quite busy at the moment advising clients on the benefits and problems with making lifetime gifts. In particular, these advisers are advising clients on the potential claw back effect that could occur if Congress chooses to give effect to that option. Some in the business argue that if a client does want to make a gift, they might want to consider discussing their options with financial adviser before Thanksgiving.
Some of these advisers have chosen to use irrevocable trusts to hold the gifts that their clients are making. This the primary reason why advisers have also taken the role of advising how much a client should gift. A client probably does not want to make a gift that would leave him or her without the means to support themselves, only to take advantage of the lifetime exemption. After all, if a client chooses to place money within an irrevocable trust then that principal cannot be withdrawn.
See Arden Dale, Gifting Booms Before New Tax Laws Kick In, Wall Street Journal, Oct. 16, 2012.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.