An increased gift tax credit, historically low interest rates and slow to recover asset values make now one of the best times to gift assets to your family members and other chosen beneficiaries.  But it might end in four months.

Under current tax law, each individual has the opportunity to transfer up to $5.12 Million worth of assets free from gift tax and generation-skipping transfer tax.   For a husband and wife, a combined $10.24 Million (reduced by the amount you have previously gifted) can be transferred to family members without transfer taxes.  But, unless Congress acts to extend the increased credit amount, this opportunity will disappear at midnight on December 31, 2012.

You can take advantage of this unique gifting opportunity by:

• Gifting cash or assets to a trust for the benefit of your family members.  This not only provides the beneficiaries with current access to the trust assets, it also protects the trust assets from claims of a beneficiary’s creditors or a divorcing spouse and can provide multiple generations of beneficiaries with assets free of additional transfer taxes.
• Gifting cash to a trust for the benefit of your family members that will use the cash as a down payment to purchase assets from you.  If structured as a “grantor” trust, the sale of your assets to the trust will avoid a recognition of gain for income tax purposes, as well as provide the benefits of trust ownership described above.
• Gifting cash to a trust for the benefit of your family members that will use the cash to acquire insurance on your life.  You can exclude from estate tax the entire death benefit paid to the trust on your death, which should far exceed the premiums paid using your gift tax credit.
• Gifting assets to a trust that provides benefits to both charities and family members.  A “split interest” trust can provide you with a charitable deduction while preserving the use of the assets for you or your family members.

In addition, today’s historically low interest rates offer additional opportunities to transfer wealth to family members by:

• Loaning cash to family members or trusts for family members at interest rates as low as 0.21%.
• Gifting assets to a trust for your benefit, in which your family members receive all appreciation on the gifted assets in excess of 1% free of gift tax.

Please Note:  Interest rates change monthly.  The interest rates noted above are only for transactions completed by September 30, 2012. 

If you would like to explore any of the estate planning opportunities discussed above, or if you would like more information on the additional planning opportunities currently available, please contact Laura Zwicker, chair of Greenberg Glusker's Family/Strategic Wealth Planning Group.