This Holiday Season, Give the Gift that Keeps on Giving


As we have mentioned many times in this blog, barring action from a currently deadlocked Congress, the federal Estate Tax exemption is set to drop from $5.12 million to $1 million dollars per person starting in 2013. One manner to utilize this exemption before its expiration is to make a large lifetime transfer.

Currently, individuals can gift up to the lifetime exemption amount of that $5.12 million which is equal to the current estate tax exemption.  Those with the means to do so can assure themselves the current estate tax exemption by completing these gifts by the end of 2012.

Many individuals are weary about parting ways with such a significant amount of their assets due to the requirement that the gifting party must relinquish control of such assets in order to complete the gift.  However, there are many techniques that can be used that could give the gifting party some control over the gifted assets or even some access to these assets.  Everyone’s situation is different and a different plan on how to use the 5.12 million gift and estate exemption in 2012 may be employed for each individual client or couple.

Moreover, using your estate and gift tax exemption does not have to mean that you give someone 5.12 million dollars outright.  As we all know, that may or may not be a good thing.  A recent article from the Wall Street Journal entitled “How to Control Your Heirs From the Grave” presented a good illustration about how, through proper planning, individuals can retain control, even after death.

For example, through the use of trusts, individuals can restrict, limit, or promote behavior through incentive distributions.  This avoids the burden of having to make decisions currently about whether to provide a lump sum to the gift recipient.  Rather, the Grantor of the Trust can set limits on such distributions to affect their goals.  (Of course, these limits must be within those generally acceptable under public policy – i.e. the gifts cannot be limited by discrimination or violations of the constitution to name a few.)  Thus, individuals can manage to control the disposition of their assets as they wish even after their death while currently locking in an estate and gift tax exemption that will benefit them and their heirs.

The 2012 holiday season is going to be the last chance for those individuals to lock-in these exemptions prior to the transition to the $1 million dollar estate and gift tax rates that will take effect on January 1, 2013.  Contact us about providing your family with the “gift that keeps on giving” this holiday season.

–  Gary Altman, Esq. and Adam Abramowitz, Esq.

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