Some argue that the most important advantage of a 529 Plan is its use as a gift-tax vehicle.
Gifts beyond that trigger gift tax or eat into your lifetime gift-tax exemption.
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In particular, gift-tax audits and income-tax audits are usually not coordinated, he said.
The large gift-tax exemption provides many planning opportunities to the wealthy.
In past years, the gift-tax exemption was often much smaller than the estate-tax exemption, which limited the early transfer of assets that were growing in value.
If the assets put in a GRAT appreciate faster than a set rate--4% a year for GRATs set up in December 2002--you pass on assets gift-tax free.
But once you give away the last share, you'll have to pay rent (unless your kids let you stay rent-free and the value of this is less than the gift-tax exclusion).
People who want to take advantage of this year's gift-tax exemption should beware of one giant constraint: The Internal Revenue Service will deny tax benefits to a trust if the person who sets it up retains control, either himself or through an agent.
Further into the future, this appreciation not only goes to family members but--most important--it goes to them gift tax-free.
Gift or no gift, tax-exempt organizations are not supposed to give large sums to select private individuals.
And those who make a gift now, tax-free, also shield future appreciation from taxes.
As 2012 drew to a close, Congress passed a law raising the top gift- and estate-tax rate to 40% from a maximum of 35%.
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The ceiling could fall back down again in 2013, they say, or the government could decide to "claw back" gift- and estate-tax savings from this year and next.
JCX-1-11 also provides an informative table summarizing the estate and gift tax rates and exemption amounts from 1975-2011.
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But the IRS considers it a tax-free gift only if the person has the right to take it in the short term.
Which is cheaper for megamillion-dollar transfers, gift tax or estate tax?
But the IRS considers it a tax-free gift only if the person has the right to take it in the short term, and the Crummey letter proves that he has that right.
The Supreme Court has said that for a transfer to be a tax-free gift for the recipient, the donor must be acting out of "detached and disinterested generosity" and without expecting any economic benefit.
The estate, gift, and generation-skipping transfer tax provisions of EGTRRA and of the 2010 Act are scheduled to sunset after 2012, such that those provisions do not apply to estates of decedents dying, gifts made, or generation-skipping transfers made after December 31, 2012.
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For wealthy individuals, the potential financial damage that could have been caused by enactment of the most onerous of the proposed income tax provisions pale when compared to the financial carnage that would have resulted from the sunset of the Bush-era estate and gift tax laws.
The donors proposed the gift of private stock on Dec. 29 and wanted to complete it by year-end (to take the tax deduction for the charitable gift in 1999), but the charity's approval process for stock gifts couldn't work that fast.
For some wealthy families, the chance, right now, to transfer substantial assets at little to no Federal gift tax cost might expire at year-end.
Advisers say some clients are waiting until Dec. 31 to make gifts to grandchildren in case Congress acts before then and to guard against the risk of paying a gift tax and then dying in 2010, when the money can be passed down estate tax-free.
On July 6 it released a "revenue ruling" that clears up long standing gift and estate tax issues relating to an estate-planning tool--irrevocable grantor trusts--widely used by wealthy families.
Current tax policies, including the estate tax, cause wealthy people to put their money in tax havens and other tax-efficient savings vehicles or gift it to family members, trusts and charities.
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In 1843 the ABS sold the first-ever charitable gift annuity, a now-popular fundraising device in which a person makes a donation to a tax-exempt entity and gets back a specified annual return for life.
This may seem counter-intuitive but the whole point of the gift tax is to prevent people from using lifetime gifts to avoid paying the estate tax.
Gift aid enables charities to reclaim the tax paid on one-off donations.
Because of the new three-year limit, the beleaguered IRSwants to start auditing more gift tax returns.
Hopefully, in addition to income and alternative minimum tax planning, planning will integrate and encompass estate, gift, generation-skipping transfer, and state and local taxes as well.
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