Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Wednesday, December 19, 2012

Rich Face Dilemma As Year Comes To An End

Gift TaxEven though the estate tax has been in a flux for the past decade, only the most recent uncertainty about the estate tax has forced the wealthiest individuals to face a difficult dilemma. Should they make a gift to take advantage of the lifetime gift tax exemption or should they hold on to their assets? Either choice has a its own benefits and disadvantages.

The benefits for making a lifetime gift are obvious. This is an excellent opportunity to make transfers of wealth to another person without incurring a tax on the transfer. For example, a person could wait to bequeath money to their favorite relative through their will, but it will likely incur a tax on the transfer of wealth because of the gift tax. If a person chooses to make that transfer before they die and utilize the lifetime gift tax exemption, the only money that the person loses is the money made in the transfer. The disadvantage here is a little less known. If the transferee decides that he or she wants to sell the asset, then the transferee will incur a tax on both the value of the transferred asset in addition to a tax on the assets appreciated value. If transferor bequeaths the asset, then the transferee will only incur a tax on the appreciated value of the asset from the time of the transfer. 

See Roberton Williams, Give Now Or Pay Later: Rich Face Dilemma With Fate Of Estate And Gift Taxes Up In Air, Forbes, Dec. 17, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.


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