Should I Make Gifts in 2011?

Introduction/Overview: the 2010
Tax Act made huge changes. How does it affect 2011 planning?

√ Question: With a
whopping $5M exemption can most Americans ignore the estate
tax?

√ Answer: The gift,
estate, and generation skipping transfer (GST) exemption amounts are now and
will remain essentially the same (reunification) through 2012 at $5 million.
The gift, estate and GST tax rate has been reduced to 35%. This does not mean
that those with under $5 million in assets can ignore  planning as in 2013 the
amount drops to $1 million and the rate jumps to 55%.

√ Question: So is
2011 and 2012 a good time to plan?

√ Answer: 2011-2012
presents a historic opportunity for wealth transfer. For the ultra-high net
worth taxpayer, the retention of the outstanding rules for grantor retained
annuity trusts (GRATs), discounts in valuation, low interest rates, and the
granting of a $5 million gift exemption are a unique convergence of positive
planning attributes that has never existed, and which may only be available for
a short time. 2011-2012 provides the best opportunity for physicians,
professionals, and others concerned about asset protection to safeguard their
wealth-it has produced the ‘perfect storm’ for asset protection and estate
planning.

√ Question: What
happens in 2013 if someone made a $3 million gift in 2011 and the exemption
drops to a mere $1 million?

√
Answer: Great question, no one knows for
sure. We believe that it will simply increase the estate tax on death, since the
calculation of estate tax includes all taxable gifts, i.e., the $3 million and
whatever is in their estate on death.

√ Question: So why
make gifts now?

√ Answer: Asset
protection needs are met. From a tax perspective, discounts are locked in and
all growth is out of the estate and state estate taxes can be saved.