December 23, 2010
By: Stephen J. Silverberg, Esq., CELA, CAP
CLIENT ALERT: ACTION REQUIRED BY YEAR END!
The tax act that President Obama signed into law on Friday, December 17, 2010, makes extraordinary changes to the Federal estate, gift and generation-skipping transfer (GST) tax provisions that otherwise would be effective this year and for the next two years.
One of the most important changes is to make the effective rate of GST tax zero for 2010. The GST tax is imposed when property is transferred to for in trust for grandchildren or even more remote descendants. This means that unlimited amount of property may be transferred to grandchildren or more remote descendants before the end of this year either directly to them or in certain trusts without any GST tax being imposed. These transfers may be made by gift or may be made from pre-existing trusts, including trusts that are not exempt from GST tax. Of course, a gift, whether made this year or in the future, may result in the payment of gift tax but, if made this year, will not incur GST tax. In any event, transfers to or for grandchildren this year from trusts usually will not incur gift tax and, as noted, will not incur GST tax.
This GST tax “holiday” ends on December 31. Whether an individual or the trustee of a trust should take advantage of it or not often is a complicated matter. If you are interested in exploring the option of transferring property to grandchildren (or more remote descendants) this year to avoid the GST tax either by making gifts or having distributions made from pre-existing trusts, please contact us immediately.