Page 8 April 2011 This month’s report from Arcadia lawyer Bob Jones By Bob Jones Does gifting make sense? It may. Individual taxpayers now have the opportunity to make full use of their $5 million lifetime exemption during their lives. This opportunity currently is scheduled to end Dec. 31, 2012 unless Congress prevents the Tax Relief Act’s new rules from sun-setting (ending). Granted this assumes that there are discretionary assets available to gift, and it must be remembered that the gift has to be a completed gift and not contingent on anything to make use of the lifetime exemption. It is generally recommended planning to make gifts earlier rather than later, so that future appreciation and income are removed from the taxpayer’s estate. An added incentive is that the new liberal gifting rules may end Dec. 31, 2012. The following are a few of the more popular strategies that should be explored with your estate planning adviser before deciding on what gifts to make: Creation of a dynasty trust for future generations: The generation-skipping transfer tax (GST) now has an exemption of $5 million, which permits the full use of your lifetime exemption to be used in creating a dynasty trust. One of the main purposes of this type of trust is to keep the trust value from being included in the bene fi ciaries’ estates in the future. Gifts to an intentionally defective grantor trust permitting the taxpayer/ grantor to pay on-going income tax liabilities resulting in greater returns for the bene fi ciaries of the trust. A sale of assets to this type of trust has added bene fi ts to the taxpayer including the use of discounts to lower the value of the assets sold and the very low current federal interest rates, which may be used to structure the terms for payment by the trust. Forgiveness of debt is a convenient way of making use of the lifetime exemption. Because so many taxpayers have had to intervene in fi nancial hardships suffered by other family members in the past years, generally resulting in making loans, it may now be time to consider gifting/forgiving the debts. Gift of a primary residence or vacation home to a Quali fi ed Personal Residence Trust is a way to take advantage of low values for gift tax purposes. In addition, the term of the trust provides a discount of value of the gift. This strategy permits the Continued on page 12 TheArcadia411.com TheRobertJoffeGroup.com Robert JOFFE Robert JOFFE 602-989-8300 602-989-8300 For every home Robert sells in Arcadia, For every home Robert sells in Arcadia, a $250 donation will be made towards teacher a $250 donation will be made towards teacher development at Arcadia High School, helping our development at Arcadia High School, helping our phenomenal teachers get the continuing education they deserve! phenomenal teachers get the continuing education they deserve!

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