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Make the most of the new gift and estate tax law


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Gifting assets to loved ones while you are alive can prove deeply satisfying, especially if those assets are used to pay for meaningful financial objec¬tives 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% estate tax rate, that rep-resents 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 over $13 million in 20 years. At today’s 35 percent tax rate, your estate tax li¬ability would be more than $4.5 million. By implementing gifting strategies, you can remove both assets, as well as po¬tential appreciation, from your estate. Conceivably, you could freeze the value of your current estate and transfer po¬tential 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 gift¬ing strategy can provide the funds necessary to meet estate tax liability and keep your assets where they be¬long — 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 million¹ and also enables you to continue to make annual gifts of up to $13,000 a year¹ 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 leg-islation expires on December 31, 2012, Congress may keep exclusion and ex¬emption limits where they are, raise them, lower them or eliminate them. We can work with you and your attorney or tax advisor to develop and implement suitable gifting strategies.

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.

¹ Limits double for married couples ($10 million lifetime gift tax exemption and $26,000 annual gift tax exemption).

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Bruce Hemmings

Bruce Hemmings is a Senior Vice President - Wealth Management and Financial Advisor at Morgan Stanley Smith Barney at Centerra. He can be reached at bruce.hemmings@mssb.com or (970) 776-5501.
The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC, Member SIPC, or its affiliates.
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 related consequences of any actions or investments described herein.

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