Wealthy grandparents have a unique opportunity this year to give their grandchildren gifts of substantial value without incurring any gift tax. This is a huge savings opportunity!—so why aren’t more people taking advantage of it?

Part of the reason may be lack of awareness. Everyone knows about the Bush administration’s year-long repeal of the estate tax, but very few people seem to be aware that the Bush tax cuts included a year-long lapse of the generation-skipping transfer (GST) tax as well. According to this article in Reuters, “generous grandparents could give away $3.5 million without paying the [GST] tax” during 2010.

But before you call the grandkids with the good news, consider whether or not you feel comfortable giving them such a large sum outright. If your grandkids are still young (and not yet responsible about money and finances) you may not want them having such a large sum to play with; and unfortunately, giving the gift in trust is not an option in this case. “To take full advantage of the GST tax break, assets should be transferred directly to beneficiaries and not to a trust. Money placed into a trust may lead to taxes when distributions are made later on.”

If your grandchildren are responsible adults, and if you’ve been considering giving them a monetary gift anyway, this lapse in the generation-skipping transfer tax could be just the push you need. Talk to your attorney or financial advisor about your gift-giving options.



If you have a favorite cause or charity you have probably considered leaving some money to that charity in your will. Perhaps you’ve even taken it a step further and toyed with the idea of specifying that the executor of your will set up a trust in the name of your favorite charity, rather than simply giving a one-time gift.

If you have ever considered either of these options you may want to ask your estate planner about setting up a Charitable Remainder Trust, which, according to this Elder Law Answers article, not only supports your favorite charity after your death, it also benefits you during your lifetime.

“A charitable remainder trust is an irrevocable trust that provides you (and possibly your spouse) with income for life. You place assets into the trust and during your lifetime you receive a set percentage from the trust. When you die, the remainder in the trust goes to the charity (or charities) of your choice.”

The altruistic reasons for setting up a charitable remainder trust are obvious, but here are some other advantages you may not have considered:

* Reduction of your taxable income

* Charitable tax deduction at the time you fund the trust

* Diversification of assets

* Income from the trust during your lifetime

In addition to all of these financial advantages, setting up a charitable remainder trust provides you with the opportunity to leave a family legacy and impress your values upon your children and grandchildren.

Please remember that charitable remainder trusts are irrevocable trusts, which means once they’re done they can’t be undone, so it’s not something to take lightly.  If you are interested in creating a charitable remainder trust, call our office or talk about it with your own attorney before you take action.

This may seem like we’re listening to a broken record, but once again Congress’ inability to act is creating uncertainty in the estate-tax-planning world. We’re little over 3 months away from a major upheaval in the estate tax, and according to the New York Times the upcoming law is likely to cause a lot of grumbling unless Congress takes action. And it’s no wonder when the new law will mean that more families are taxed at a higher percentage:

“The amount of each estate that is exempt from estate tax is scheduled to become $1 million in 2011 (down from $3.5 million in 2009, when the tax was last in effect). The tax on the balance is to rise to 55 percent in most cases (up from the 2009 rate of 45 percent). So now is the time to consider the various tax strategies available.”

What this lower exemption rate really means, however, is that more families will be caught off-guard when a loved one passes away and the survivors are suddenly hit with a massive tax bill.

That is unless families start planning now.

The Times article mentioned above suggests that “the easiest way to reduce the tax bill is to give as much as $13,000 a year each to as many people as you like — which you can do without paying gift tax;” but when you consider how little $1 million really is (especially when the value of your home, retirement savings, etc. are all included when adding up your total assets) we’re guessing that there are a lot of people out there who are over the exemption amount, but don’t feel they can afford to go handing out $13,000 every year. Much more appealing are some of the other planning strategies suggested in the article, including:

* “Buy a one- or two-year [life insurance] term policy to cover the tax bill if the exemption amount is only $1 million.” The policy will help your heirs cover what could be a hefty tax bill, but the policy “[could] be canceled if Congress eases your estate tax concerns;” and

* “Create a trust.” The article suggests a GRAT (Grantor Retained Annuity Trust), which is a great tool for high-value assets that are expected to appreciate during your lifetime; but for married couples simply looking for a way to protect their children from a hefty federal estate tax down the road a Credit Shelter Trust may be a better option.

There are a number of other ways you might be able to prepare for the coming estate tax upheaval—the best way to protect your own family is to contact an estate planning attorney and ask about your options.

We’ve written often on this blog about the concerns that caregiver children have for their elderly parents, but that’s only one side of the story. Many families also have an adult child living far from home, and though the concerns of the long-distance child may be different from the one who lives down the street, they’re no less important. Here are some of the more common concerns we hear about in our office, and some suggestions for addressing them:

I worry that when I talk to my parents on the phone I’m not getting the whole truth about their health or situation. This is one of the most common concerns of long-distance children. The best thing to do is be up front with your parents. Tell them that you want—and need—to know the truth, even if they think it will worry you. If you still don’t think they’re being completely honest, enlist the help of a sibling or nearby friend or neighbor who can be your eyes and ears. You can also ask your parents to sign a waiver with their doctor giving him or her permission to share their medical details with you.

I’m afraid that my mom is losing the ability to manage her money and could end up broke. Seniors are the most common victims of financial fraud, and it’s hard to keep tabs on mom or dad if you live far away. The best way to prevent financial fraud is to talk about money with your parents early and often. It may go against the grain, but discuss your own finances with them if it will help them open up about theirs. Visit as often as you can and watch their mail for letters from promotion companies or shady looking “charities”; and put your parent’s phone number on the National Do Not Call registry (1.888.382.1222 or www.donotcall.gov)

I feel guilty that my sister (who lives in the same town as my parents) is shouldering the bulk of the burden. The sibling who lives closest does often end up being the physical caretaker of elderly parents, but that doesn’t mean those who live far away can’t help. The most common contribution from long-distance children is financial support—and that’s no small thing! Offer to pay for a housekeeper, in-home care assistant, taxi service, etc. And don’t forget to talk to your sister about what she needs. Helping your caregiver sibling is another way of helping your parents.

I love my parents; I want to do more to help than just give them money. A common complaint of seniors is loneliness and fear of being forgotten. One way to help your parent and help calm your own fears is to simply keep in touch. Make a point of calling your parent on a weekly or bi-weekly basis. Send frequent cards or e-mails. Plan a family vacation that your elderly parent can be a part of. You can help your parents with your expertise as well; try to be involved in “the big stuff” such as meetings with estate planners, financial planners, nursing staff, or geriatric care managers. And most importantly, work regular trips to visit your mom or dad into the budget. There’s really no substitute for face-to-face communication.

I think that my siblings close to mom and dad are making the wrong decisions for them, or are pressuring them to make decisions they don’t really want to make. Undue influence is a serious accusation, and if you truly think your siblings may be threatening or manipulating your parent you should seek the help of a professional. Before you take irreversible action you need to have a private conversation with your parent; ask if they are being coerced and try to determine if fear is a factor. If you still think your parent is being manipulated against their will contact an elder law attorney immediately.

I don’t want to miss out on what could be my last moments with my parent. There’s just no way around it, your parents won’t be here forever, and nobody wants to feel that there were things left unsaid. If you truly worry that your parent is facing his or her last days the best advice we can give is to go visit if at all possible, and make your visit matter. Look through old photos, talk about your memories, and say the things that need to be said. If you can’t visit in person make phone calls or send letters. Don’t save your best sentiments for the eulogy—tell your parents how important they are to you today.

It is common knowledge that 2010 is a great year for heirs. If you didn’t know about the 2010 estate tax repeal, all the media coverage of George Steinbrenner’s recent death (and his heirs’ lucky tax break) probably alerted you. Everybody is saying that 2010 is a good year to die… But what about those of us who plan to live through 2010?

According to the New York Times even hale and hearty individuals can save on their taxes in 2010—it just takes a little more planning. “A bigger issue [than the estate tax]… has become the gift tax, which is linked to the estate tax to prevent people from giving away their fortune in life to avoid taxes at death. It now stands at 35 percent, the lowest rate since the 1930s.” The gift tax is a tax on money or property that you give to another individual while you are still living. Currently an individual may give up to $13,000 per year (or up to $26,000 if you give as a married couple) without incurring gift tax.

If you’re a wealthy parent or grandparent trying to decrease your taxable estate through gift-giving, this is the year to do it for a number of reasons. First, of course, is the historically low 35% gift tax rate. Second, “in addition to the historically low rate, another reason to make sizable gifts this year is that the values of many assets are still depressed. Long-held stocks, real estate and shares in private businesses could all increase in value, and giving them away now will allow them to appreciate with your heirs and not in your estate.” A final reason to consider giving your large gifts before the year is over is that the 35% rate won’t last forever; the gift tax is expected to rise to 55% next year.

How can you take advantage of this lucky confluence of events? Well, as always when you’re dealing with large sums of money (not to mention dealing with the IRS), you’ll want to be careful. We do NOT recommend that you simply write a check for $13,000+. Contact your estate planner or your financial planner to find out how you can safely reduce your taxable estate while giving security to the people you love.