Over the past several years, legislation such as the American Taxpayer Relief Act of 2012 and the Affordable Care Act has significantly affected the gifting vs. estate tax analysis for ultra-high-net-worth individuals. The gap between transfer tax rates and higher income tax rates is much narrower than it has been in many years. As a result, we must now consider the impact of income tax, as well as the transfer tax, from gifts. The old, commonly held view that taxable gifts are always better, may no longer be sufficient.
This white paper takes a fresh look at conducting a thorough analysis. It covers the tax comparisons and potential implications, how the types of assets and age of the donor may affect the outcome, and, ultimately, considerations for making sure your gifting strategy is in line with your goals and family vision.
- The old principles that guided gifting and estate planning could be inadequate today. The new tax landscape could make any gifting analysis slightly more complicated while the results may be more consequential.
- Because of changing tax laws, we must now consider the impact of income tax, as well as the transfer tax, from gifts.
- Three primary factors to consider when determining the suitability of making taxable gifts are the cost basis of the gifted asset, expected return from the gifted asset, and the opportunity cost stemming from prepayment of gift tax.
Wells Fargo & Company and its affiliates do not render tax or legal advice.