New Gifting Opportunities

April 13, 2006

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When estate taxes were reformed in 2001, the divergence of the estate tax and the gift tax presented new opportunities.

You can take advantage of the $1 million lifetime gifting exemption by transferring up to this amount, immediately or over time, free of estate taxes. This produces income tax splitting benefits and reduces the size of a potentially taxable estate upon death.

In addition, your estate later can use the remaining estate tax exemption available at that time, assuming the full repeal is not continued by new legislation before its sunset date in 2011.

Of course, using the $12,000 annual gift tax exclusion (in 2006 and 2007), you can continue to transfer wealth that won't count against the new gift tax exemption. However, gifting your assets, whether by annual exclusion or lifetime exemption, has tax basis implications that affect the paying of capital gains tax.