It’s not too late yet. For many wealthy parents, grandparents or business owners, giving lifetime gifts is a valuable way to decrease your taxable estate. And 2010 is a great year to give those planned lifetime gifts.
Generally speaking, properly planned lifetime gifts can help lower your taxable estate over the course of years, so that your assets are distributed to whom you want with less going to the tax man. Each year, you can give gifts of a certain amount to other individuals without having to pay gift tax. In 2010, for instance, you may give up to $13,000 (or $26,000 if you give as a married couple) to other individuals. If you have two nephews, you could give each $13,000 without tax. You could give another gift of a similar amount next year to the same individual, and so on through the years.
Many individuals want to give more than the allowed annual amount. If you fall into this category, it is important to talk to a professional who understands the intricacies of gift taxation before making large gifts. If you are thinking about larger planned gifts, there is still a small window in 2010 to complete the gift. And it is a great year to do it.
Why? At least three reasons. First, at 35%, the current gift tax rate is the lowest it’s been since the 1930’s. Second, when the 2011 bell tolls, there are sure to be a myriad of tax changes, and one of the expected changes is that the gift tax will rise to 55%. For those giving large gifts, a 20% increase is quite a hit. Third, the values of many key assets are still depressed. If you gift those assets now, there will be less there to tax than if they were significantly appreciated.
All in all, by giving a gift in 2010 with a depressed asset, you can potentially save on the value of the gift while being taxed at historically low rates. While no one can predict the future, the gifting climate is excellent for persons with the right assets.