Personal Wealth Law News

A recent article from Reuters reminds us again of the several reasons why this is the ideal time to think of transferring wealth:

• the $5,000,000 gift tax exemption remains in effect this year. Who knows what next year will bring?
• asset values, although rising, are still lower than their peaks, in many cases, which is a good time to give them away
• closely held assets can be given away using discounted values that create very favorable gift and estate tax results. Again, this might disappear next year.

Those who do planning this year can be assured of receiving favorable tax treatment. Those who wait are taking a chance.

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There has been much in thne news about the top 1% of income earners in the country, emphasizing their fortunate status. But a recent article in the Wall Street Journal indicates that things aren’t so rosy for this group. From 2007 to 2009, the income of the top 1% fell by about 30%. By contrast, the income of the bottom 90% fell by only 3%. The article identifies five reasons for this significant decline: overconcentration in a single asset or business; leverage-using debt to try to achieve financial goals; too much spending; the combination of the first three; and family issues- divorce, family business disputes, etc.

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A recent article in Smart Money reminds us of ways in which the $250,000 limit on FDIC insurance coverage can be expanded. Take as an example a husband and wife. Each can have an account with $250,000 protection. A joint account gives tham another $250,000. If each of them sets up a revocable trust for the other, that’s an additional $500,000. Suppose they jointly set up a trust to benefit their three children. That’s six more exemptions, an additional $1,500,000 in FDIC coverage. Beyond that, they can open similar accounts at other banks to add more coverage.  

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Much was written about the shabby treatment given to philanthropist Brooke Astor just before her death, and her son is now appealing his conviction for mishandling her assets. The IRS is apparently not satisfied with the tax returns filed by the Estate. The taxing authorities are claiming that the Estate owes far more in federal estate tax than was reported. Apparently, there are issues about gifts made to charities at Mrs. Astor’s death and in previous years. Gift tax returns were not filed despite very substantial transfers over the years to family members, including her son. The IRS is also denying charitable deductions because of the uncertain nature of the gifts to charity. Eventually, it will all be sorted out, but it could have been avoided entirely if Mrs. Astor’s advisors had been more careful in planning her estate.

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The proposals recently issued by the Obama Administration include substantial changes in income, estate and gift tax law. They would, if enacted, make transfers of wealth more difficult and costly. Since this is an election year, there is much uncertainty about their future, but it’s important to know what they are, just in case. We will shortly issue an Alert on this subject, which will be posted on this site.

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