Gifting and other Tax Planning Opportunities in 2010


As we enter the final quarter of 2010, we want to inform you about circumstances which make this a remarkable year for gifts and intra-family sales. For those who have used their $1,000,000.00 lifetime exemptions from Federal gift tax, it may be worthwhile to pay gift tax as Federal gift tax rates are only 35% in calendar year 2010. This rate is much lower than the 45% Federal gift tax rate in place in 2009, and far lower than the 55% Federal gift tax rate presently scheduled to take effect in 2011.

Not only are tax rates favorable for lifetime gifting, but the current economic environment is also extremely favorable for lifetime gifting and intra-family sales due to the convergence of three factors. First, many asset values are unusually low. Second, interest rates are historically low. Third, valuation discounts for minority interests and lack of marketability are currently available, but could be drastically reduced or altogether eliminated in calendar year 2011 by legislation.

By way of example, one possible technique that could utilize all three of the converging factors mentioned above is a loan from you, individually, to a trust for the benefit of your spouse and children. The IRS rate on interest paid annually on a three- to nine-year loan is currently only 1.73%. The trust could then use the loan amount to purchase assets from you (such as interests in limited liability companies that have been structured to enable valuation discounts).

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Published In: Finance & Banking Updates, Tax Updates, Wills, Trusts, & Estate Planning Updates

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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