Ann and Bob have a large family and look to distribute some of there
money to their family. The money outside of the real estate property
could be gifted to the family by gift splitting and potentially gifting
$32,000 to each of their family members over only a couple of years.
"both spouses can claim a $16,000 per donee exclusion although
only one spouse actually makes the gift, and the spouses can give
each donee a total of $32,000 before either spouse’s gift becomes
taxable".(Pearson, pg.12-4 ) If there is 7 children and 15
grandchildren they could potentially gift $704,000 a year until.
"Another important advantage of lifetime gifts is that their value is
frozen at their date-of-gift value. That is, any post-gift appreciation a
escapes the transfer tax rolls. Consequently, transfer tax savings are
maximized if the a donor gives away the assets that appreciate the
most"(Pearson, pg. 12-29). Stocks that have appreciated rapidly could
be gifted first and negate the tax liability of appreciated assets. The
real estate property valued at $100,000,000 could setup a
"testamentary trust creating successive life estates" and split it
amongst the 15 grandchildren and their children. "Under this
arrangement, an estate tax would be imposed at the death of the
person establishing the trust but not again until the great grandchild’s
death"(Pearson, pg 13-6). Estate tax would be imposed once every
other generation and could help reduce estate taxed being paid at the
time of the each generation's death. If Bob and Ann gifted $1,000,00
to each of their children and grandchildren, they would have to pay
gift tax on each of the donations over the exclusion amount and
doner would also have to recognize the tax. It wouldn't be an efficient
tax strategy and they would incur a large gift tax. The consequences
of leaving a large estate divided amongst the children and
grandchildren could potentially cause chaos in the family. The
property is valued at $100,000,000 and the several million in stocks,
cash and bonds could cause interfamily disagreements over inequal
distribution of wealth.
Refrences:
Gift Taxes. Pearson+. (Pearson's Federal Taxation). Retrieved March 2,
2023, from
https://plus.pearson.com/courses/301c22ce26cf4c8cba2fd88f7eaf1
093_d2l_snhumlp/products/173542/pages/630?locale=&platformId
=1030&isTpi=Y&lms=Y
