Because the fiduciaries both knew that the IRS could hold the estate or the trust liable for the gift taxes
, and they distributed the assets regardless of this knowledge, they were both found personally liable for the gift taxes
Netting the gift can be an attractive means of transferring property when a donor does not have cash on hand (and does not want to sell other property to raise cash) to pay gift taxes
. A net gift is also useful when a donor wants to limit the extent of the gift to its net value.
At the time of the insurance trust transaction, Willet and his attorney realized it was better for Betty to pay the gift taxes
. At age 71 she was more likely to outlive the three-year reach of section 2035(c) than was Willet, age 87.
For taxpayers that want to maximize their cre(lit but not pay additional gift taxes
, a calculation can be made to determine the amount of gift that can be passed free of gift tax.
Also, gift taxes
would be collected over a multiple-year period rather than every calendar year as under the current system, they added.
Amounts above that limit can be subject to gift taxes
for the borrower.
Even if a transfer incurs gift taxes
, the estate realizes a tax benefit because gift taxes
are calculated based on the net gift--what remains after the taxes are taken out.
Such gifts will qualify for the gift tax annual exclusion, meaning that they pass through the tax line free of gift taxes
. Now assume this same individual establishes a gift program under which he gives $13,000 each year to a child.
This ruling, combined with the general inadvisability of paying gift taxes
in light of possible permanent estate tax repeal, may increase the popularity of GRATs when doing lifetime estate planning.
* Use all or part of the unified credit for federal estate and gift taxes
. Each individual can transfer, either during life or upon death, $600,000 ($1.2 million if the spouse joins) free of federal estate and gift taxes
This technique has the added advantage of shifting cash flow, so no gift taxes
will be due on the payment of premium.
This is the highest the exclusion amount has ever climbed, and there's a good chance it'll be reduced when Congress reconsiders estate and gift taxes