Sunday, August 29, 2010
As people focus on the estate tax mess this year, they overlook the upcoming negative changes to the gift tax. Currently, the gift tax is 35%, the lowest it’s been since the 1930s. Next year, the gift tax rises to 55%. Another reason to give gifts away sooner rather than later is that asset values are still depressed. Giving away assets now will allow them to appreciate with your heirs rather than in your estate.
In addition, giving gifts to grandchildren is much cheaper this year than it will be next year due to the lack of the generation skipping tax. For example, a $3 million gift to a grandchild will cost the donor $4.05 million this year but approximately $7.2 million next year.
For more information about giving gifts as an estate planning tool, see Paul Sullivan, A Year to Give to Your Heirs, and Save on Taxes, N.Y. Times, Aug. 27, 2010.
Special thanks to Jim Hillhouse (WealthCounsel) for bringing this to my attention.