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A Better Partnership


Jan 2018
January 24, 2018

Plan Now—The Window of Opportunity May Disappear

Although certain provisions of the Act relating to gift and estate taxes will not disappear until 2026, there are numerous reasons to act now instead of later. In addition to taking advantage of annual exclusion gifts ($15,000 per recipient) and making direct payments to medical and educational providers, it might make good sense to use a portion or all of the increased exemption from gift and/or generation-skipping transfer tax.

The Power of Early Gifting. 

Under almost any circumstance it is beneficial to gift earlier rather than later. Transferring an asset earlier means that any subsequent appreciation will occur outside of your estate and may result in a greater benefit to the recipients of the gift. This alone can result in significant tax savings. From a non-financial standpoint, you can participate in the enjoyment of the gift while you are alive. 

Because we are living longer, making lifetime gifts to children and grandchildren now may help them when they need it most. 

Finally, gifting assets earlier allows the next generations to become familiar with the investment process, trust administration and tax strategies, better preparing them to handle a larger inheritance in the future. 


Remember that any exemption used for lifetime gifting will reduce the amount that can be used for the estate tax. Under current law, the gift and estate provisions will revert back to the 2017 exemption amounts (inflation adjusted) in 2026. In reality, the provisions could be adjusted before then due to a change in party control or other congressional act. Although there is a question about whether gifted assets may be “clawed back” if an individual dies when the exemption is lower, estates of individuals who make gifts likely won’t be in a worse position than if they had not made the gifts at all. Notwithstanding this uncertainty, we recommend you take advantage of the increased exemption if you are able.

Cheaper During Life Than at Death. 

Because of the structure of the gift and estate tax law, it is less expensive to make lifetime gifts than to make gifts upon death. The reason is that lifetime gifts are tax “exclusive” whereas gifts at death are tax “inclusive.” In other words, the amount of tax paid by the transferor as a gift tax (if any) during life is not subject to transfer tax, whereas, in the case of a transfer at death, the amount paid in estate taxes is also subject to estate tax so the overall taxes paid are greater.
Lifetime gifting can be a great strategy (from a financial and non-financial perspective). Advanced wealth-transfer strategies need to be planned carefully and take time to implement. 

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