Lifetime gifts in estate management

Abstract

T he most effective method of reducing the taxable estate is by making lifet,ime gifts to potential estate beneficiaries, directly or through the medium of a trust or trusts. A properly planned gift program, carried out over a period of years, can produce substantial savings. The estate planner is deeply concerned with how the ownership of family property is distributed among various family members and how it should bc redistributed after death. Delaying the transfer of property from one generation to the next, until death overtakes the older generation, maximizes transfer costs. Transfer of property from the older and wealthier members of a farnil) to others during the lifetime of the former reduces future estate tax liability. If t,he recipients are in lower income tax brackets, such transfers reduce the aggregate family income t,ax bill and thus increase either the family spending money or the aggregate amount of family assets. Where this is accomplished by gift, there will be gift tax liability whenever the $30,000.00 lifetime gift exemption ($60,000.00 for nmn and wife) and the $3,000.00 ($6,000.00 for man and wife) annual gift tax exclusion for each donee has been exhausted. When property is transferred from one member of a family to another. whether by gift or for value, we are accomplishing not only the elimination of the property from the estate of the giver, but we arc also keeping future appreciation out of his estate and future increases in income out of his income tax return. And when a man does not want to incur gift tax liability, hc may sell property to a.nother member of the family. The proceeds of sale replaces the property transferred in the estate of the giver, but future appreciation gets over to the recipient without transfer tax.