Estate Planning and Taxation

ESTATE TAX, GIFT TAX AND GST TAX INFORMATION

You can make substantial gifts without paying gift tax or generation skipping transfer (GST) tax, provided however that the gift is structured correctly. The lawyers at Clements Pajak LLC can analyze whether gifting works for you in light of your estate planning needs. If gifting is appropriate, we can advise you as to the best way to structure your gifts including whether trusts are recommended.

For every estate a primary concern may be the effect of estate, gift, or generation-skipping transfer taxation on the value of property passed at your death. The federal and state laws with respect to estate administration are complicated. Federal laws have changed over time to allow a person to pass the following amount of property federal estate tax free if no prior taxable gifts have been made.

Year

    

Federal Amount

2008

    

$2,000,000

2010

    

Choice of no limit with carry-over basis or $5,000,000

2011

    

$5,000,000

2012

    

$5,120,000

2013

    

$5,250,000

2014

    

$5,340,000

2015

    

$5,430,000

The threshold for Massachusetts, by contrast (starting in 2006) is and remains at $1,000,000.

If your wealth is over $1 million (or may grow to more than $1 million) you might consider gifting.

Here is a synopsis of the federal amounts that generally pass gift, estate or GST tax free:

2012
__________
2013
__________
2014
__________
2015
__________
Exemption amount for gift, estate, and GST tax$5,120,000$5,250,000$5,340,000$5,430,000
Exemption amount for GST tax$5,120,000$5,250,000$5,340,000$5,430,000
Highest estate and GST rate35%40%40%40%

Other state estate tax laws may be similar to Massachusetts, or different. Laws in each state in which a person’s other property is connected must be examined in the planning and administration of wealth transfer.

Appropriate gift and generation skipping gift transfer planning is essential to minimize taxes. Analysis of prior taxable gifts must be made in conjunction with planning. Probate laws also need to be considered, but the bottom line is - what do you want with respect to transferring your wealth?

Does gifting make sense for you given your current situation?

Factors to consider:

  • the amount of wealth you have
  • your income needs
  • your family needs
  • prior gifts made
  • your risk tolerance
  • your concern about capital gains with respect to any gifted assets, and
  • your ability to “let go” of control and possession of assets.

Additional aspects to consider:

  • Analysis of potential gifting takes time to determine both whether to gift, and, if so, how to gift.
  • Gifting can take a variety of forms. It can be outright or in trust. If it is in trust, various trust structures can be used, such as irrevocable GST trusts; trusts to benefit children, grandchildren or spouses, and current charitable trusts, etc. The form of gifting that will work best for you depends on your situation.
  • The value of what you are gifting may be subject to appraisal requirements – such as closely-held stock or partnership interests, or real estate valuations. These appraisals also take time to complete properly.

Gifts of the federal exempt amount may not cause gift tax returns to be filed.

Gifts over the exempt amount usually require a federal gift tax return to be filed by the person giving the gift. The exempt amount has changed though the years.

Years

    

Federal Amount

1982-2001

    

$10,000

2002-2005

    

$11,000

2006-2008

    

$12,000

2009-2012

    

$13,000

2013- 2015

    

$14,000

The lawyers at Clements Pajak LLC have extensive experience to help you plan your estate, whether married or single, gay, lesbian, transgender or straight, U.S. Citizen or non-U.S. Citizen. Sometimes proper planning can eliminate transfer taxes at the federal and/or state level. Contact us for your consultation.


Our goal is to ensure that you have timely information regarding the current state of the law and possible tax savings opportunities that are available now. We hope this is helpful to you.

This document is for informational purposes only, may not reflect the most current legal developments, and may be considered advertising for legal services under the laws and rules of professional conduct of the jurisdictions in which we practice. It is not offered as legal or any other advice on any particular matter, and is not intended to create and does not constitute an attorney-client relationship between you and Clements Pajak LLC. You should not act or refrain from acting on the basis of this document without seeking the appropriate legal or professional advice on the particular facts and circumstances at issue.

IRS Circular 230 Notice:To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding U.S. tax penalties.