Lars's clients: a slow response to the benefit of gifts.

April 5, 2012, by

TE BLOG. Storm lightening. 03.2012.iStock_000018541149XSmall[1].jpg
Lars is telling his wealthiest clients it seems like a near-perfect storm of factors favoring large gifts in 2012:

The Federal exemption is high ($5 million), but this will be revisited by Congress in 2013.

Asset values are off what they were a few years ago.

Congress might also revisit current law permitting valuation adjustments for lack of control and lack of marketability of family-owned entities.

Interest rates are low for loans and sales of assets to future generations.

There is no State gift tax (in Washington). The State doesn't add large lifetime gifts in the estate tax calculation the way the Federal rules do.

Few of his clients, though, have taken much advantage of the situation. Lars tries to figure out why.

He looks at Uncle Nils, in his 80's, worth $20 million, and facing (or at least his executor and heirs are facing) major estate tax cost. Nils has recently given $500,000 to a trust for relatives, the one with which Lars as trustee is having an investment contest with Nils. This gift will still, though, only use a small portion of Nils's $5 million lifetime gift tax exemption. Nils had used $1 million of it when that was the limit a few years back, and this trust will likely use a little more, depending on the applicability of annual gift tax exclusions.

Nils could give more, still be way more than comfortable, and be able to fund his Premarital Agreement obligation to Sylvia upon his death. He has interests in real estate LLCs that would work well in the perfect storm for gifts that Lars has described to him. Nils is considering this, but he's slow to act. Nephew and CPA Lars has a couple of theories why Nils and others are hesitating. He really likes coming up with theories.