A limited-time opportunity to make tax-free lifetime gifts up to $5.12 million ($10.24 million for a married couple) through the end of the year when gift tax rules are set to expire is fueling an unprecedented transfer of wealth among high-net-worth individuals. However, Richard A. Behrendt, J.D., Senior Vice President, Director of Estate Planning, for Baird’s Private Wealth Management group, advises caution.
“There has never been anything close to this opportunity to make tax-free gifts, but while the timing may be ideal for some, it’s definitely not right for everybody,” Behrendt said. “There is a lot of hype out there and we are hearing from clients who are feeling pressured to act now when it might really be in their long-term best interest not to do anything at this point.”
Behrendt continues, “If you are 93 and in failing health with more than $1 million in cash or securities then there is no question that you should seriously consider taking advantage of this gifting opportunity. But if you are 65, recently retired, and could potentially have a lot of years to live ahead of you, you must be very careful not to give away assets you might need later on.”
Those considering a smaller gift may have more time to decide as well. “If you’re contemplating a gift of $1 million or less ($2 million or less for a married couple), then there is no reason to rush to make gifts before year-end,” he said. “Even in the worst case scenario, individuals will be able to gift as much as $1 million, or $2 million for a married couple, after 2012.”
In some cases, Behrendt says, investors can accomplish their objectives in other ways, such as making smaller annual gifts over a period of time. He recently advised a wealthy individual who was considering a gift of $2-3 million to ensure his siblings would receive regular income for life of about $50,000 per year. Instead, he informed the individual that he and his wife can make annual gifts of $13,000 to each sibling and their spouse to gift a total of $52,000. The individual was relieved to know he could achieve his objective without making a huge lump-sum gift.
“If you’re considering a lifetime gift, what you need to know is that gifts are irrevocable,” Behrendt said. “Given that, I would highly recommend you get a second opinion from a qualified financial advisor, accountant or attorney before you act to make sure it’s in your best interest.”
A whitepaper, “2012 Gifting Opportunity Bigger Than Ever,” explores this opportunity in greater detail and offers specific strategies for making a substantial gift. To schedule an interview with Rich Behrendt on this or related estate planning topics, contact Amy Nutter, Baird Public Relations, at (414) 765-3988 or firstname.lastname@example.org.
Baird is an employee-owned, international wealth management, capital markets, private equity and asset management firm with offices in the United States, Europe and Asia. Established in 1919, Baird has more than 2,700 associates serving the needs of individual, corporate, institutional and municipal clients. Baird has nearly $97 billion in client assets. Committed to being a great place to work, Baird ranked No. 21 on FORTUNE’s 100 Best Companies to Work For in 2012 – its ninth consecutive year on the list. Baird’s principal operating subsidiaries are Robert W. Baird & Co. in the United States and Robert W. Baird Group Ltd. in Europe. Baird also has an operating subsidiary in Asia supporting Baird’s investment banking and private equity operations. For more information, please visit Baird’s Web site at www.rwbaird.com.
Robert W. Baird & Co. does not provide tax services.
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MILWAUKEE, Dec. 7, 2012