Word to the Wealthy: Don’t Look a Gift Tax in the Mouth

12:59 pm Uncategorized

A New York Times article says that the 2010 gift tax is a tax-saving gift to the wealthy, and that individuals with more than $5 million and couples with more than $10 million should look long and hard at taking advantage of it in 2010 by making gifts.

The current gift tax of 35 percent is the lowest it’s been since the 1930s.  But once the clock strikes midnight on Dec. 31, 2010, it goes up to 55 percent with an exemption of just $1.12 million.  And, according to a number of financial experts, people who overlook this opportunity are going to miss significant tax savings in 2010.

According to the article, here are the comparative tax calculations on a $3 million gift to a grandchild, assuming lifetime exemptions have been exhausted:

2009:  110 percent (gift tax, generation-skipping tax and gift tax on the generation-skipping tax) = $6.3 million.

2010: 35 percent (gift tax only) = $1.05 million.

2011:  140 percent (gift tax, generation-skipping tax and gift tax on the generation-skipping tax) = $7.2 million.

Many estate planning experts are counseling clients to not rush into anything, but to plan and watch what happens with estate tax debates in Congress and mid-term elections (which are next Tuesday!).

Need help with your estate tax planning?  Contact our Newport Beach estate planning law firm.

Help is available to you by contacting your Southern California financial planning experts today.

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