Lifetime gifting brings many options.
You have done well for yourself.
You have money you would like to leave to your family.
However, lately you have been thinking about giving some of it to them now with warm hands.
According to a recent Forbes article titled “5 Lifetime Gift Strategies For You And Your Family To Consider,” you have several options in lifetime gifting.
What are they?
A grantor retained annuity trust (GRAT).
With a GRAT, you can divide property interests, keep your income stream, and make discounted gifts to your future generations.
Assets are transferred to a trust, but you retain rights to income or an annuity payment for a certain amount of time.
If the GRAT has money within it after the annuity period ends, the beneficiaries receive the remainder free of estate or gift taxes.
If you die before the end of the trust terms, the trust becomes part of the taxable estate.
These implications make it vital to carefully choose the terms of the trust.
A defective grantor trust.
This trust with a strange name (I mean, who wants a trust that is intentionally "defective"?), provides a welcome tax twist.
With this trust you can benefit from the differences between the income and transfer-tax treatments of irrevocable trusts.
Essentially, you can transfer estimated future asset appreciation at a reduced gift-tax cost.
As the guarantor, you are treated the same as the trust for income tax reasons.
For transfer tax purposes, you are treated separately.
What does this mean?
You can effect a sale to the trust without capital gain taxes.
Family limited liability entities.
Do you have a high net worth with business, investment, and personal assets?
Why is family limited liability entity planning appealing?
They can change.
They can evolve as family businesses and family dynamics change.
Such entities are useful for protecting assets from lawsuits, creating long-term estate plans, and sharing income with those family members with lower incomes.
A lifetime credit shelter trust.
Are you wary to transfer significant assets?
Do you still want to leverage the increased lifetime gift-tax exemption?
These would be a good option.
You can indirectly maintain your assets because your spouse has access to the assets as a beneficiary.
You can take advantage of the exemption ($11.4 million per person in 2019) and keep these assets out of your taxable estate.
You and your spouse can each create separate shelter trusts.
An intra-family loan.
You can loan money to family without it being considered a gift.
These means you can help your loved ones out financially without triggering a gift tax.
You do need to set up a minimum interest rate to make it an official creditor relationship.
This benefits everyone in the family by keeping the money in the family.
Although you have many options, do not attempt any one of them alone.
Work with an experienced estate planning attorney to create a plan using the best strategies for your unique goals and circumstances.
Reference: Forbes (August 5, 2019) “5 Lifetime Gift Strategies For You And Your Family To Consider”