Gift Planning Before The End Of 2012
November 13, 2012
- Outright Gifts. Gifts of cash, securities, or other property outright to family members are simple and effective. The person to whom the gift is made acquires the donor's basis in the property. Keep in mind that outright gifts may not be an effective use of an individual's GST exemption.
- Gifts in Trust. An individual making substantial gifts often wishes to put some restrictions or limitations on the family members' access to the property. Trusts are flexible instruments that can be established to hold the property for the benefit of family members while providing restrictions on the use or expenditure of those assets. In addition, gifts in trust may allow the individual to use his or her GST exemption to transfer assets on a multi-generational basis with no transfer tax.
- Spousal Trust. The Spousal Trust technique may be attractive to married couples who wish to use their gift or GST exemption amount but are concerned about losing the benefit of those gifted assets. This is a trust established by one spouse (the "donor-spouse") for the benefit of the other spouse (the "beneficiary-spouse") using the donor-spouse's gift exemption amount and possibly his or her GST exemption amount. The Trustee of the Spousal Trust can make distributions to the beneficiary-spouse during his or her lifetime. However, the best result is achieved when the married couple treats the Spousal Trust as a trust of last resort and spends from their other assets first.
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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice within this client alert is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in a client alert.