Below is a brief glance at what you’ll find in the July/August 2014 issue.  The Estate Planner – July/August 2014
Net gain for taxpayers: Tax Court approves net gift strategy
A net gift is a technique that potentially allows reduction of the effective gift tax rate by requiring the donee to agree to pay the gift tax as a condition of receiving the gift. This reduces the gift’s value for gift tax purposes. Recently, the U.S. Tax Court approved a strategy that can reduce a gift’s value even further: In addition to paying the gift tax, the donee can agree to assume the potential estate tax liability that would result if the donor dies within three years after making the gift. This article offers an example of how net gifts work, while a sidebar explains how gifts can reduce transfer taxes.
Estate planning for the young and affluent: How to hedge your bets
How can young, affluent people plan their estates when the tax landscape may look dramatically different 20, 30 or 40 years from now? Today, the current gift and estate tax exemption is high and the estate tax rate slightly higher than the income tax rate — but that could change in the future, requiring a shift in strategy. The answer for young people is to take a flexible approach that allows them to hedge their bets. This article explains how a carefully designed trust can achieve this purpose.
Wealth preserver: Use an ILIT to shield life insurance proceeds from estate tax
Life insurance can provide peace of mind, but it’s important to not own the policy at death. Why? The policy’s proceeds will be included in the taxable estate and may be subject to estate taxes. To avoid this result, a common estate planning strategy is to set up an irrevocable life insurance trust (ILIT) to hold the policy. This article describes the tax benefits of an ILIT, along with some drawbacks.
Estate Planning Red Flag: Your spouse’s estate didn’t make the portability election
Portability allows a surviving spouse to take advantage of a deceased spouse’s unused estate tax exemption. But portability isn’t automatic: It’s available only if the deceased spouse’s estate makes a portability election on a timely filed estate tax return. But this article notes that the IRS now permits estates to make a late portability election under certain circumstances. The rule change is of particular interest to same-sex married couples who were ineligible for portability and couldn’t have made the election before the law was changed late last year.