Gifting and Marcellus Shale


When estate planning lawyers discuss gifting as an estate planning strategy with clients, there are a few very important components to this discussion that must be reviewed in order to most effectively leverage gifting as an estate planning strategy. Pursuant to the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the “Act”) that President Obama signed into law last December, each person has a five million dollar exemption for lifetime gifting over the thirteen thousand dollar per person annual exclusion. What this means is that under the Act a person may make gifts over the annual exclusion of up to five million dollars without incurring gift tax. That being said, the Act is only in effect for 2011 and 2012 and with 2011 almost over, there is not a lot of time for a person to take advantage of this exemption.

The most important part of the gifting discussion centers on what type of asset is most suitable for gifting. In many situations, this discussion will focus on assets that are expected to appreciate in value after the gift is made such that the growth of the asset gifted will be outside of the person’s estate who made the gift. In the case of a gas lease, an interest in natural gas may be a very attractive asset to consider gifting. This analysis focuses on the timeline of the gas lease because the value of a natural gas interest is usually lower the earlier one is in the timeline.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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