The wealthy have to make a choice – bet on the estate tax (0%) for 2010 or make gifts (35% gift tax).
For 2010 estates are exempt from all taxes, but they will soon soar to 55% for 2011 without remedial action by congressional lawmakers (post-election session). For those taxpayers who choose not to pass-on by Dec. 31, the optimum strategy is GIVE IT AWAY!
The all-time low gift tax, now 35%, will only go higher in the future. Taxpayers can give away a total of $13,000 in 2010 without tax consequences. Well, none until they reach the $1 mil lifetime exemption. At that point, gifts are taxed at the same rate as estates.
Caveat – Individuals with health issues should consider the likelihood of their passing within three years of making a gift. There are special rules in this circumstance that would offset any savings advantage by 50%.
Taxpayers should consider waiting as late as possible in December to make the gift decision (children, grand-children, friends or other relatives). The goal is to ensure the gift giver doesn’t die before Dec. 31 – the latest date on which the alternative estate tax would still be 0%.
Tax Wisdom: A great civilization is not conquered from without until it has destroyed itself from within. The essential cause of Rome’s decline lay in her people, her morals, her class struggle, her failing trade, her bureaucratic despotism, her stifling taxes, her consuming wars.