We are all disappointed and discouraged by the ongoing turmoil in the financial markets and the loss of value in our own investment portfolios. But we want to remind our high net worth clients of an important opportunity in this depressed market, and that is the opportunity to shrink your taxable estate by gifting. As you may recall, Federal Law allows each American a $1 million exemption from the U.S. Gift Tax. This is in addition to the $12,000 per person Annual Exclusion.

Now is an opportune time to consider using your $1 million lifetime exemption to reduce your taxable estate and to reduce future death taxes to be paid by your family. You can leverage your gifting while stock and real estate values are low. For example, if you have suffered a 20% loss in the value of a bundle of stocks, a gift that would have eaten up $1 million of gifting ability a few weeks ago would now use up only $800,000 of your exemption.

The U.S. Estate Tax is not likely to go away. The U.S. Senate has recently adopted proposed legislation that would lock the exemption from Estate Tax at $3.5 million per person. The lifetime Gift Tax exemption is likely to stay at around $1 million. If you use your lifetime Gift Tax exemption, of course that eats into your Estate Tax exemption at death, dollar-for-dollar.

Let us know if we can answer any questions for you about this important gifting opportunity!

Written by Paul Hess