Ok, there is a lot to write about here. A huge bill just passed Congress and was signed by the Prez. There is a lot of stuff to cover in the bill. I’m going to start with the most pressing issue in this post.
The following only applies to the lucky readers who have assets in excess of 5 million, or the luckier readers who have grandparents with assets over 5 million who intend to give some to their grandkids. For those clients there is a once-in-a-lifetime planning opportunity. The problem is, this opportunity ends at midnight, December 31, 2010.
The Skinny
Transfers above the gift tax exemption (currently $13,000) to grandkids and great grandkids are subject to what is known as the generation-skipping transfer tax. The thing is, if you give money to your children it is subject to tax when you pass, and when your children pass and leave it to your grandchildren. The IRS doesn’t want you to skip that first taxation by passing straight to your grandkids, so we have the GST tax.
The Opportunity
The 2010 Tax Relief Act creates a unique opportunity to make gifts through December 31, 2010 that are not subject to the generation-skipping transfer tax. This is because, under the new law, the tax rate is zero for any generation-skipping transfer made in 2010. Beginning January 1, 2011, the tax rate for these transfers will be 35%. In two short years the rate goes back to 55%.
The Payoff
If you intend to leave assets to your grandkids do it now, and I mean now, now. Talk to an estate planning attorney today. Even if you aren’t ready for your grandkids to get the money, create a trust and gift the money today. It will save you at least 35% in taxes.
For more info see this.
