Tax Planning Advice: Gift Assets Likely to Appreciate--Benjamin Ledyard

Which Assets Are Appropriate to Gift? “The best assets to gift are those you won’t need, those that have a high likelihood of appreciation, such as depressed real estate holdings or a business interest, but also something heirs won’t just go out and liquidate.” As well, donors should not give away income-producing assets they might need in the future. If the gift is cash, it may be wise to set up some kind of trust for “spendthrift protection,” especially for youthful heirs.

For minors, this may mean a Uniform Transfer To Minors (UTMA) or Uniform Gift To Minors (UGMA) account, both of which are managed by custodians, and into which parents, grandparents, relatives or friends can make irrevocable transfers in any amount. If the donor, acting as custodian, dies before the funds are turned over to the child, usually at age 18 or 21, the account may be taxable as part of the donor's estate.

Life insurance, says Ledyard, is an especially good asset to consider giving awayat present because of the increased lifetime gift exclusion. Life insurance, created as a death benefit for one's children or to pass along a business, becomes part of a person's taxable estate if he or she is listed as the owner of the policy, no matter who is named as beneficiary. Ledyard says life insurance can be gifted by signing over ownership of the policy to another person (presumably a family member such as a spouse) or by putting it in a trust, for example, an irrevocable life insurance trust.

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