As year end approaches, there are still a few days to take advantage of some tax and estate planning opportunities that will end with the stroke of midnight on Dec. 31. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 created a few atypical year-end action items for some wealth managers and their clients.
Aside from the usual tactics such as realizing losses on securities, donating to charities and maxing out 401(k) and IRA contributions, here are a few, significant, others:
Generation-Skipping Transfer Tax—in 2010, Zero; in 2011, 35%
For clients who wish to transfer substantial assets to grandchildren, there is a giant tax savings to be had for doing that in 2010. According to the December “Personal Planning Strategies,” newsletter from Proskauer, the Generation-Skipping Transfer (GST) Tax rate for 2010 is zero. This is newly confirmed in the Tax Relief Act. A gift of $100 million to a grandchild in 2010 would result in a net $65 million to that grandchild. But if you wait until Jan. 1 2011, the net transfer to that grandchild would be $44 million—so for a gift that large, the savings is more than $20 million, according to Ben Ledyard (left), director of wealth strategies at Silver Bridge. For details and examples, see Generation-Skipping Tax: How to Save $20 Million Before 2011.
Give Generously to Children