OREGON ESTATE TAX PLANNING WITH GIFTS – BE CAREFUL

Oregon’s estate tax only applies to the decedent’s wealth on the date of death. ORS 118.010. And Oregon has no gift tax. Thus, if assets are given away before death, by even one day, the tax is zero. But gifts can backfire. Here’s why. Continue reading

$5 MILLION (ACTUALLY $5.25MILLION) ESTATE TAX EXEMPTION RETAINED!

On January 2, 2013, President Obama signed the American Taxpayer Relief Act of 2012, which retains most of the estate and gift tax laws in effect in 2012.

The New Laws

Highlights of the Act include:

● The estate tax, gift tax and generation skipping tax exemptions of $5M have been retained. (Actually, the exemption is now $5.25M per spouse by reason of inflationary adjustments.) Continue reading

SLATs (Spousal Lifetime Access Trusts)

In general, “SLAT” refers to a trust created during a spouse’s lifetime for the benefit of the other spouse. (For simplicity, I will assume the husband is the party creating the SLAT, and the wife is the beneficiary.) The SLAT usually continues for the rest of the wife’s life. Only the husband’s assets are used to fund the trust, and the wife is given no powers (such as a general power of appointment) that would cause the SLAT assets to be included in her estate at her death. No marital deduction is claimed.

Advantages of a SLAT:
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$5M GIFT TAX EXEMPTION (AND “CLAWBACK”) – URGENT OPPORTUNITY?

I continually hear of the urgency in utilizing the $5M gift tax exemption, based on the paranoia that Congress will reduce it (or worse yet, let it return to $1M). For a couple of reasons, I think the benefit of making large gifts (to protect against a rollback) is speculative at best. First, the “no tax increase” climate in Congress suggests a rollback is unlikely. Second, even if there is a rollback, it is necessary to make huge gifts of high-basis assets to realize a tax savings. Finally, the potential estate tax savings is often recaptured by the carryover basis attaching to lifetime gifts.
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