Top 10 Estate Planning Ideas for Year-End: Tax Savings Available in 2010 May Not Last

Pillsbury

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10.28.10

Year-end 2010 provides opportunities to transfer assets to your desired beneficiaries at a greatly reduced tax cost. Attached is a brief summary of some of the more effective methods by which you can benefit from the favorable transfer tax rules, some of which are in effect only through the end of this calendar year. Next year, the rules may be much less favorable. Naturally, each person's circumstances and interests are different, so we recommend contacting a professional advisor regarding your personal situation and finding the best way for you to potentially save significant amounts of tax while preserving assets for your beneficiaries.

1. Gifts to Children and/or Grandchildren

The maximum gift tax rate is at a historic low of 35% in 2010. Under existing law, the maximum gift tax rate will increase to 55% in 2011. Although Congress is expected to enact legislation that will lower the 55% rate, there is no assurance that this will happen. Therefore, year-end 2010 is an opportune time to make gifts (either outright or in trust) if financial circumstances permit and you are so inclined. Additionally, because there is no federal estate tax in 2010, we recommend that any year-end gifts be made to a revocable trust that would become irrevocable on December 31, 2010, provided the donor is still living. That's because if death occurs prior to 2011, transfers can be made free of federal estate tax.

There is also currently no generation-skipping transfer ("GST") tax. This tax is expected to be reinstated in 2011 at a rate of 55%. Therefore, year-end 2010 affords a unique opportunity to make gifts to grandchildren and descendants of younger generations. The gift can be made outright, in the form of an LLC or LP interest (as further discussed below) or to a trust. Because there is some uncertainty whether a gift to a trust will avoid GST tax consequences when the tax is restored, we have crafted some trust structures that limit the tax risk to the family if the trust is exposed to GST tax. In addition, there may be opportunities to save substantial tax with distributions, either outright or in further trust, from trusts created in prior years that are not exempt from the GST tax.

Downloads: Top 10 Estate Planning Ideas for Year-End: Tax Savings Available in 2010 May Not Last

These and any accompanying materials are not legal advice, are not a complete summary of the subject matter, and are subject to the terms of use found at: https://www.pillsburylaw.com/en/terms-of-use.html. We recommend that you obtain separate legal advice.