When an estate is in excess of the Unified Credit, gifting assets is a good way to avoid future estate taxes.

A Qualified Personal Residence Trust (QPRT) is one of the best tools to use because it is so simple.

While we still have a $5,000,000 exemption we should all be encouraging our clients to make gifts this year, assuming it is a taxable estate.

Here are a few of the characteristics of a QPRT:

1.    Transfer the home or homes (a couple is allowed to transfer up to 4) at a significant DISCOUNT. 2.    The gift FREEZES the value at the discounted gift value, so if the home appreciates by the time the client dies all of the appreciation is out of the estate. 3.    While the client is living they still live in the home just like they always did. 4.    If they are married there is no “rent” due at the end of the “term” unless they want to pay rent.  Some couples like the idea of paying rent to the kids after the term as a further means to help the kids and reduce the estate tax. ...

The $5,000,000 per person gift tax exemption is supposed to last until December 31, 2012.  Why use it now if you still have next year?  Here are two good reasons.

The first is that given our country’s economic and fiscal situation, the Joint Select Committee on Deficit Reduction, also known as the “Supercommittee”, may reduce the gift tax exemption sooner than 2012.  At least half the members of the committee are insisting on tax increases as part of the deficit reduction “solution”.  (As one wag put it, where do all the “solutions” go after politicians get elected?)

The Obama administration has not only proposed tax increases in its jobs bill, but is also calling for a return of the estate and gift tax rates and exemptions to their 2009 levels.  That means an estate tax exemption of $3,500,000 per person, but a gift tax exemption of only $1,000,000 per person.  So it is possible a significant reduction in the current $5,000,000 gift tax exemption could occur sooner than the end of 2012.

This...

 Wall Street Journal, Family Businesses Catch a Big Break, by Anne Tergesen: