Low Interest Rate Gift Planning

Estate Planning

While clients still have all of 2020 to take advantage of annual exclusion gifts (currently $15,000 per donee) and the increased lifetime gift tax exemption (now $11,580,000 per taxpayer), practitioners may wish to recommend that clients not wait too long to take advantage of the current low interest rate gift opportunities for a number of reasons, including the advantage that once a gift is made, any future appreciation of the transferred property and any future income generated thereby will escape transfer taxes.

In addition, future legislation could limit a client’s gift planning opportunities. Proposed changes that have been discussed in the past and that are likely to be discussed again include (i) eliminating “discounts” for closely-held business and real estate interests; (ii) prohibiting short-term (e.g., two-year) Grantor Retained Annuity Trusts (“GRATs”) (discussed below); and (iii)

limiting the benefits of “defective” grantor trusts (discussed below) and long-term “dynasty” trusts. None of these changes has been enacted yet, but practitioners may wish to strongly recommend that clients in a position to do so take advantage of their gift tax planning opportunities sooner rather than later, after considering the impact of the gifts on their donees.

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“Low Interest Rate Gift Planning,” by William Finestone was published in the July 2020 edition of Estate Planning (Vol. 47, No. 7), a Thomson Reuters publication. Reprinted with permission.