PLANNING OPPORTUNITIES ABOUND

NOW IS THE TIME TO GIVE

As a parent or grandparent, there are several tax and non-tax reasons for you to make lifetime gifts to your child or grandchild. Many transfers are motivated by gift and estate tax savings, particularly in light of the new $5,000,000 gift and estate tax exemption amount for 2011 and 2012. A common non-tax reason is to provide for the child's support and maintenance in the event of any future adversity to your family. Providing the funds for higher education expenses or for the smooth and orderly transfer of control of a family business are other common reasons involving both tax and non-tax motives.

If you decide to implement a gift strategy, the details of effecting those transfers must be considered. As part of your gift strategy, you must decide:

How much should you give? Under the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, each taxpayer's federal gift tax exemption amount increased from $1,000,000 to $5,000,000, thereby allowing a taxpayer who made prior taxable gifts totaling $1,000,000 to make additional lifetime gifts of up to $4,000,000 during 2011 and 2012 without triggering gift tax. This amount may be leveraged up by making gifts of interests in property the value of which may be subject to discounts for lack of marketability or for minority interests.

When should the gifts be made? The timing of the gifts depends largely upon your tax and non-tax motives for making the gift. Under the 2010 tax act, however, the increased gift tax exemption applies only to gifts made in 2011 or 2012.

What specific assets should you give? The selection of assets to give depends upon your objectives. Cash is the simplest form of property to give. If you wish to transfer periodic income to a child, the property transferred should be high-income yielding property. On the other hand, if your goal is to shift future appreciation to the child, high-growth property would be appropriate. In addition, you may transfer a life insurance policy on your life or on the joint lives of you and your spouse to a trust you create for your descendants.

If a gift is appropriate, there are many forms the gift may take. Your gift may be an outright bequest, or it may be a gift in trust. You may create one of several different types of irrevocable trusts for your child's benefit depending upon the property to be transferred and your planning objectives. For a minor child, you may create a custodial account for his or her benefit.

Summary.
We stand ready to assist you in determining whether a gifting strategy should be part of your overall wealth transfer plan. Should you have any questions, please contact us.

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THE FELDMAN LAW FIRM LLP
Two Post Oak Central
1980 Post Oak Blvd., Suite 1900
Houston, TX 77056-3877
713/850-0700 Fax: 713/850-8530
info@feldlaw.com