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Take advantage of the new gift and estate tax laws


Gifting assets to loved ones while you are alive can prove deeply satisfying, especially if those assets are used to pay for meaningful financial objectives like starting a business, purchasing a home or educating a grandchild. In addition, every gift you make removes assets from your estate and may help you achieve some of the following objectives:

Reduce estate taxes: A married couple gifting $26,000 annually to each of their three children over the next 30 years will have given away $2,340,000. At today's 35 percent estate tax rate, that represents a tax savings of $819,000.

Transfer appreciation: If most of your assets are invested in stock or real estate, you may experience substantial appreciation over your lifetime. Assets of $5 million appreciating at a hypothetical rate of 5 percent annually, for example, would grow to more than $13 million in 20 years. At today's 35 percent tax rate, your estate tax liability would be more than $4.5 million. By implementing gifting strategies, you can remove both assets, as well as potential appreciation, from your estate. Conceivably, you could freeze the value of your current estate and transfer potential appreciation to your heirs.

Keep your estate intact: A large, unexpected estate tax bill can force family members to sell real estate or other valuable assets that they would rather keep. A well-conceived gifting strategy can provide the funds necessary to meet estate tax liability and keep your assets where they belong - with your loved ones.

Keep a family business thriving: The opportunity to gift stock or own¬ership interest in a closely-held fam¬ily business is another gifting strat¬egy that can remove substantial assets from your estate.

With the passage of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (TRA 2010), you have an unprecedented opportunity to remove assets from your estate through gifting strategies that can help reduce estate taxes and provide your loved ones with a more substantial legacy. This legislation increases the lifetime gift tax exemption from $1 million to $5 million and also enables you to continue to make annual gifts of up to $13,000 a year to each of your children, grandchildren or any other person you wish without incurring gift tax.

However, you should note that this opportunity may only be temporary. When the current tax legislation expires on Dec. 31, Congress may keep exclusion and exemption limits where they are, raise them, lower them or eliminate them.

To learn more about the new gift and estate tax legislation, gifting strategies and how you can potentially maximize your gift using life insurance, contact us for a copy of the brochure, "Taking Advantage of the New Gift and Estate Tax Law."

Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Smith Barney Financial Advisors do not provide tax or legal advice. This material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Individuals are urged to consult their personal tax or legal advisors to understand the tax and legal consequences of any actions, including implementation of any estate planning strategies, or investments described herein.

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John Kyle

Since 1994, John Kyle has been a successful small business owner, an account executive with a national insurance company, and a sought-after business consultant for other small business owners. John is also a financial advisor with Morgan Stanley Smith Barney in Denver and specializes in creating safety nets for his client’s investment portfolios. Contact John at john.j.kyle@mssb.com or 303-595-2021.

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