Those focused on what the government might do with the estate tax next year are forgetting about the likelihood of an increase in the gift tax.
Estate planning attorneys in New York City and elsewhere are helping clients disperse portions of their estate this year to take advantage of the historically low 35 percent gift-tax rate, Bloomberg News reports. As we reported recently on our New York Probate Lawyer Blog, the estate tax hiatus will last through the end of the year but could return next year with a rate as high as 55 percent on estates valued at more than $1 million.
Changes to the gift tax could come as lawmakers debate tinkering with the estate tax; more plans than can be counted are currently floating through Congress.
In response, some estate planners are assisting clients with making gifts while they are still alive. Bloomberg News uses the example of an 84-year-old widow who gathered her children at her lawyer’s office and told them she was distributing $20 million as a Christmas gift.
The woman said she didn’t want anyone wishing she were dead; and the historically low 35 percent gift tax is lower than the 55 percent estate tax rate that could return as soon as January.
New York Times columnist Paul Krugman has called the Dec. 31 deadline the “Throw Mamma from the Train” law as black humor abounds about wealthy parents having accidents before the estate tax returns with the new year. Taking advantage of the current gift tax rate is a viable alternative to such drastic and unlikely measures.
Historically, the gift tax has been matched to the estate tax to keep the wealthy from giving their money away to avoid the Internal Revenue Service. This year, you can gift up to $13,000 without tax consequences, up to a $1 million lifetime maximum. After that, the current 35 percent gift rate applies.
New York City Probate Attorney Jules Martin Haas handles all types of probate cases, including Wills, estate planning, estate settlement, advanced directives and guardianship matters. Please call me at (212) 355-2575 for a free consultation to discuss your rights.