Thursday, July 17, 2014
Tiffany B. Carmona (Bessemer Trust, Chicago) recently published an article entitled, Client Out of Exemption? Consider a Net Gift, Probate & Property Vol. 28 No. 4, 43-47 (July/August 2014). Provided below is a portion of the article’s introduction:
An unprecedented wave of large lifetime gifts were made in 2011 and 2012 in light of the increased amount that could be given away without incurring federal gift tax under the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (TRA 2010), Pub. L. No. 111-312, 124 Stat. 3296, and its sunset provision, which caused many taxpayers to anticipate an end to the opportunity to use the increased exclusion come 2013. Instead, 2013 brought with it the American Taxpayer Relief Act of 2012 (ATRA 2012), Pub. L. No. 112-240, 126 Stat. 2313, which continued the increased basic exclusion amount first codified by TRA 2010.
As a result of those large 2011 and 2012 gifts, many high net worth taxpayers are devoid of exclusion for future gifting, apart from the inflation adjustments to the basic exclusion amount that ATRA 2012 sustained as well. Being out of exclusion does not foreclose the possibility of continued planning for those taxpayers, however, because certain techniques in the estate planner’s toolkit can be employed without the application of exclusion or the payment of gift tax by the donor. Among these is the net gift.