The Will Doctor’s Prescriptions

The Obama Victory increases the chances of success for his administration’s estate and gift tax proposals, highlighted in the last post.  This is a middle ground compromise between the horror of returning to 2001 Exemptions and Rates, and the generosity of the 2012 $5.12 million exemption and 35% rate.

Huge uncertainty remains.  At this point, it appears that the administration is threatening to let the economy go over the fiscal cliff to force Republican cooperation, but neither camp will accept culpability.  The result is a potential stalemate until the spring, when the you know what hits the fan, and they take action (best bet is Obama’s proposal), and pass the law retroactively to December 31st.  Pure speculation, but something to chew on.

Looking down the road with a month and a half to go, it appears that using the full power of 2012 gifting has little downside and lot’s of upside-except for elderly donors with low cost basis.  We have developed a plan which is likely to succeed for these families using an older technique called a Grantor Retained income Trust, based on ideas published by David Lane, Esq., on the West Coast.  We believe that this technique is likely to allow use of the liberal 2012 gift tax exemptions, without subsequent penalty or forfeiture, while still reaping the benefits of the step up for the income tax cost basis at death which would be sacrificed using other gifting techniques.

Posted in Status of Tax Legislation, WillPlan Blog.

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