900 N. Kings Highway, Cherry Hill, New Jersey 08034
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215.563.0276 ·
Fax: 856.667.3652
The Online Advisor - July 1999
Make the right gift to cut taxes
Making gifts of the wrong type of property can defeat your tax planning. The best property to give will depend on your tax goals. Are you trying to reduce current income taxes, future estate taxes, or both? Here are some items which may not be suitable gifts when trying to accomplish certain objectives.
* Items that shrink in value. Items such as patents, copyrights, certain mineral rights, and some improved real estate can actually have lower value in an estate than they have currently.
* Assets with potential tax losses. The tax loss from selling certain assets may be more beneficial to the donor than to any intended recipient.
* Property you intend to use. If you continue to use property, such as a residence, after you have given it to another, you may not get the tax benefits you sought.
* Highly appreciated property. Elderly people may want to retain property with a low tax cost (basis) since the property will get a "step-up" in basis in an estate (generally, the value at date of death). If you make a gift of this property during your lifetime, the recipient is required to use your lower tax cost (basis) for all tax considerations.
* Contracts. If you are currently receiving contract payments on which you are reporting gain, a gift of this contract will generally accelerate all the tax on the contract.
* Life insurance. Gifts of life insurance will not remove the value of the policy from your estate if you die within three years of the gift.
Gifting can substantially reduce your income tax and estate tax if done properly. If you are planning to make sizable gifts, please contact us. We would be happy to assist you and your attorney.