subject: GIFT And ESTATE TAX PLANNING And Sub Chapter "S" Trust [print this page] Gift and Estate Tax Planning: Gift and Estate Tax Planning:
Even when estates are valued at less than the minimum federal estate tax exemption [i.e., $1,000,000 in 2011], this does not mean that the estate would be exempt from death taxes. Several states have modified their exemptions and some of them impose inheritance or estate taxes on values much lower than the Federal exemption. Therefore, planning should still be conducted to insure that the state death tax bite is minimized.
One method of reducing the taxable estate is to make gifts of assets to children and grandchildren and/or nieces and nephews. If such gifts by the donor do not exceed $12,000 per recipient then they are legally excluded from gift and estate taxation. Thus, a husband and wife with four children could jointly gift $24,000 each year to each child, or, a total of $96,000 each year to the four children.
However, a serious negative in making such transfers for gift and estate tax avoidance purposes is that they become the property of the recipient and can then be lost to third parties in the event of a divorce or a creditor's judgment.
Sub-Chapter "S" Trust
Sub-Chapter "S" corporate stock should be transferred to a Living Trust, but only after careful planning has occurred. If stock in an "S" corporation is transferred to a Trust which fails to contain certain detailed provisions for the ownership and disposition of such stock, then this failure could cause termination of the "S" status at the settlor's death and, as a result, trigger extremely adverse income tax consequences for the "S" shareholders.
GIFT And ESTATE TAX PLANNING And Sub Chapter "S" Trust
