Friday, November 16, 2012
Wall Street Journal: Feathering the Kids' Nests:
Some homeowners race to transfer property to their children before lifetime gift-tax exemptions expire Dec. 31.
Want to give the kids a little something extra for the holidays? Get going. The generous lifetime gift-tax exemption — in which couples can give up to $10.24 million to descendants tax free — expires at the end of the year.
The lifetime exemption will drop to $1 million for individuals (from $5.12 million) and to $2 million for couples (from $10.24 million) if Congress doesn't intervene. While some experts expect Congress to act, they think the resulting cap will still drop.
So for wealthy families, there's a limited window to give sizable assets—including real estate—to children while avoiding a tax hit. ... Wealthy families have been taking various measures to prepare for lower exemption limits and higher tax rates. Some people gift properties using a separate vehicle, such as a limited-liability company or a trust. These allow parents to maintain some control, and since these vehicles can minimize the value of the gifts, parents can maximize the lifetime gift-tax exemption elsewhere.