Is Now a Good Time for Wealth Transfers?

Our ever changing tax laws seem perpetually riddled with sunset clauses. And that makes estate planning opportunities fleeting. For instance, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRA), increased the federal gift tax exclusion to $5 million. Accordingly, you can make $5 million in gifts in your lifetime without paying a gift tax. However, the TRA is scheduled to sunset at the end of 2012. Post-sunset, the federal gift tax exclusion will revert to its previous lower level of just $1 million. Therefore, if you have been considering making large gifts to your children or grandchildren, it may be advantageous to move those assets before the end of next year.

Also on the estate planning radar screen is the fact that Standard & Poor’s recent downgrade of long-term credit rating for U.S. Treasury debt from AAA to AA+ may cause an increase in the safe harbor interest rates for intra-family debt transactions. These so-called Applicable Federal Rates (AFRs) are currently near historic lows — and that obviously works to your advantage when making lifetime transfers of business interests or property to your children or grandchildren. We’ll keep a watchful eye on interest rates so we can effectively guide your estate planning decisions.

If you want to discuss how to take advantage of the increased gift tax exclusion under the TRA or how a potential increase in AFRs might impact your estate planning, you should consult your attorney, accountant, or wealth manager.

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