TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, December 16, 2012

WSJ: Caveats for Last-Minute Givers

Wall Street Journal:  Caveats for Last-Minute Givers, by Laura Saunders:

Estate planners say prospective clients who want to give away millions of dollars before Jan. 1 are bombarding them with last-minute requests for tax advice. Many people waited until after the election to decide to give, says Diana Zeydel, an estate lawyer at Greenberg Traurig in Miami. ...

Since this year's exemption applies both to gifts made during one's lifetime and to assets in an estate after death, people who use up their allowance this year won't get one when they die, unless the law becomes more generous. In many cases such a move makes sense, because it removes future appreciation from the estate.

What happens to this year's gifts if the exemption shrinks or the rate rises? Many experts think they won't be affected. "I don't think Congress's intention was to set up a 'gotcha,"' Ms. Zeydel says. At worst—if there is a "clawback" of some assets—she and others think it won't include any appreciation after the date of the gift.

A bigger worry is the difficulty of cramming complex decisions into little time. Givers face a wrenching emotional decision—handing over control of a large sum—and planners must work with myriad legal complexities to do quickly what usually takes at least three to six months. Last-minute planning is especially difficult when much of a couple's wealth is possessed by one spouse—say, in a large individual retirement account.

Expert opinion is divided about one last-minute technique some planners advocate called a "donative promise gift." Givers using it make an irrevocable promise to deliver assets at a future date. While many agree this technique works in Pennsylvania, where the law is established, it is less clear that it works in other states. ... Carlyn McCaffrey, an estate lawyer at McDermott, Will & Emery in New York, is reminding some last-minute givers of a simple place to start: Give cash or forgive loans to relatives or friends. ... 

But, as she warns, "Beware of cookie-cutter approaches." Howard Zaritsky, an estate attorney in Rapidan, Va., who advises on complex cases, agrees. "This rush makes me fear that in four or five years I'll be called to be an expert witness on lots of estate malpractice cases," he says.

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