Transfer Wealth Tax-freeTransfer Wealth Tax-free
You might think of the gift tax as the lesser of two evils for transferring wealth, with the other evil being the estate tax. Certainly, it can be cheaper to pay gift tax rather than estate tax, because of the gift tax's nature.1 But always remember: There is a third way. A donor can transfer wealth during his lifetime without paying any tax on the transfer. If a donor has liquid assets and at least
David L. Weinreb & Warren Litman
You might think of the gift tax as the lesser of two evils for transferring wealth, with the other evil being the estate tax. Certainly, it can be cheaper to pay gift tax rather than estate tax, because of the gift tax's “tax-exclusive” nature.1
But always remember: There is a third way. A donor can transfer wealth during his lifetime without paying any tax on the transfer. If a donor has liquid assets and at least several years to engage in wealth transfer, a strategy using rolling short-term grantor retained annuity trusts (GRATs) can transfer a substantial amount transfer tax-free.2
Our research quantifies the trade-offs between paying gift tax and using rolling GRATs. The results show that for a donor wi...
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