Sunday, August 3, 2014
There was a long trend of using lifetime gifting to reduce estate tax. Previously, lifetime gifting could have a significant impact on reducing estate taxes due to a combination of high estate tax rates, low exemption amounts for estate tax, and low capital gains tax. The American Taxpayer Relief Act of 2012 reduced the benefits that lifetime giving could have on estate taxes, by reducing the tax efficiency of lifetime gifts versus gifts at death. This was caused by increased tax and exemption rates. This change makes lifetime gifting less attractive for estate planning, especially in states with low estate tax and high income tax.
See Jay Waxenberg & Nathan Brown, The Narrowing “Tax Efficiency Gap”, Wealth Management, June 25, 2014.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.