Year End Planning - Part 1: Gifting

October 3, 2012

As 2012 comes to a close, you should consider taking advantage of the current tax laws, with an understanding that 2013 may bring significant tax law changes (as we've discussed in prior e-mails).  There are some things that you should consider doing before the end of the year.  This e-mail is one of a three part series for your consideration.  Your financial planner at Polaris is here to help you make some of these difficult decisions.

Consider Gifting: This is always a difficult decision for clients to make. There are social implications and control considerations that any person should consider before making a gift. The decision to gift gets more complicated due to "annual exclusion gift" limits and "lifetime gift tax exemption" limits.

The annual exclusion gifting limit is $13,000 per person. For example, a married couple could pass $26,000 to each of their children without it touching their lifetime exemptions. Any gift above this amount can either be taxed (at very high rates) or subtracted from their lifetime exemption limits. Next year the annual limits go up to $14,000 per person. This is a great way to keep control of your estate while trying to limit your future estate tax liability.

The most significant changes next year will be to the lifetime gift tax exemption. It will go from $5,120,000 per person to $1 million. Currently, a couple with a living trust could pass $10,240,000 to their heirs without any gift tax. Starting in 2013, that same couple can only pass on $2 million to their heirs without taxes. To add insult to injury, the tax rate is going from 35% to 55% for estates above $1 million per person. Several of our larger relationships are considering significant gifts this year. This is not without risk. There is no IRS precedence to know for sure that the government may not try to "claw back" these gifts. Most attorneys and CPA's that we've spoken with believe that it is very unlikely, but you should be aware of the possibility.

There are a lot of complex strategies for annual and lifetime gifting. Please call your Polaris Financial Planner for more information about how (or if) to implement these strategies.

As a side note, I have been asked to be on Fox Business Network with Melissa Francis on Tuesday, October 23rd at 2:15pm PST to discuss the current political climate, the pending tax law changes, and the effects both have on investors and the stock market. Please feel free to tune in and see me live next week.

As always, I welcome any questions or comments.


Jeffrey J. Powell

Managing Partner, Polaris Wealth Advisers, LLC




Polaris Greystone Financial Group, LLC is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. This material does not take into account your particular investment objectives, financial situation or needs, is not intended as a recommendation to purchase or sell any security, and is not intended as individual or specific advice. Investing involves risk and possible loss of principal capital. Diversification does not ensure a profit or protect against a loss. Advisory services are only offered to clients or prospective clients where Polaris Greystone Financial Group, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Polaris Greystone Financial Group, LLC unless a client service agreement is in place.

Categories: Polaris Greystone Financial Group, LLC.

Tags: Fox Business, Gifting, Melissa Francis, Tax Law Changes, Tax Laws


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