Discussions of the looming fiscal cliff have paid scant attention to estate and gift taxes. But wealthy people might do well to consider being very generous this month and giving very large gifts at today’s bargain tax prices.
However, proceed with caution. If you are gifting assets to your nephew that have appreciated in value, your gift comes with your basis – the amount you paid for the asset. If your nephew sells the asset, he will owe tax on both your capital gain and any appreciation after the gift. If your nephew inherits the asset, however, he will only owe capital gains tax on the gains that occur after inheriting the assets.
Given the uncertainty surrounding federal estate and gift taxes, it’s important to avoid costly mistakes. Consulting with an experienced estate planning attorney can help you develop a smart gifting strategy that aligns with both current law and your long-term goals.
