Wills, Trusts & Estates Prof Blog

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

Sunday, August 30, 2020

Gifting in uncertain markets

GiftWhen volatility is high, many clients consider updating their gifting plans. However, "it is important to consider the opportunities that gifting can present in uncertain markets."

We have seen historically low rates in 2020 that have resulted from consistent market volatility. Also, the current gift tax exemption ($11.58 million for individuals and $23.16 million for married couples), allow wealthy clients to transfer significant wealth while "maximizing transfer tax savings."

"One way to maximize clients’ gifting plans in a volatile market is to gift assets that are undervalued as a result of market instability, but that would otherwise be expected to appreciate in value." This is a good strategy because you would report the gifted assets at the fair market value, which would likely be low in volatile market, but would then appreciate outside of your clients' estate for estate tax purposes. However, the success of this strategy is conditioned on whether the IRS accepts the reported values. This is a good estate planning option during uncertain times, like now. 

You can also estate plan with discounted values like the discount for lack of control (minority discount) and the discount for lack of marketability. "To take advantage of these and other valuation discounts, wealthy families may want to consider contributing undervalued assets to a closely held entity, such as a family limited liability company or family limited partnership."

Now is a great time to take advantage of the historically low interest rates and the substantial gift tax exemptions. 

See Rose Watson, Gifting in uncertain markets, Investment News, August 17, 2020.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.


Current Events, Estate Planning - Generally, Estate Tax, Gift Tax, Trusts | Permalink


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