Plan Your Estate by Attorney Denis Clifford

Author:Attorney Denis Clifford [Attorney Denis Clifford]
Language: eng
Format: epub
ISBN: 9781413325126
Publisher: NOLO
Published: 2016-04-16T04:00:00+00:00

Gifts of a Family Business

Gifts of minority interests in a family business can result in significant estate tax savings. Currently, sophisticated estate tax planners play some very fancy games here. See Chapter 28.

Gifts to Minors

You can make a gift to a minor (a child younger than 18) during your life, as well as leave property to a minor when you die. A minor cannot legally control any substantial amount of property in his or her own name. An adult must have that responsibility. If, while you are alive, you want to make a gift directly to a child, rather than to his or her parents or guardians, you have two choices:

• Give the money in a trust. If you, while living, make a gift to a minor using a properly drafted child’s trust, you obtain the annual gift tax exclusion in the year the gift is made.

• Appoint a “custodian” for the gift, under your state’s Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). (UTMA, UGMA, Let’s Call the Whole Thing Off.) The UTMA applies in all states but South Carolina, where the UGMA applies. The UGMA provides only a device for making gifts to minors while you live, not for leaving property to them when you die.

Using either act, you can, while you live, make a gift to a minor by naming an adult custodian for the gift property. (See Chapter 6.)

In most states, the custodianship must end when the child turns 18 or 21. Obviously, that satisfies the IRS age requirement that the minor must receive the gift outright by age 21. However, in the states where the custodianship can end up to age 25, you’ll need to be more careful. In those states, if you’re concerned about gift tax and you want to make gifts over the personal exemption, you need to provide that the recipient will receive the gift before the minor turns 22, as lifetime gifts over the personal exemption received after age 21 may be subject to gift tax.

Gifts to minors made while one is alive are often given primarily for personal reasons, not for gift tax savings. Your personal motives may override maximizing gift tax savings, or those motives may work harmoniously with gift tax rules.

EXAMPLE 1: Oksana, who is quite prosperous, wants to be certain her grandson Viktor and granddaughter Marya will have enough money to attend college. Viktor is 12 and Marya is ten. Oksana wants to make the gift now, so she can take pleasure in knowing that her grandchildren know their educational future is secure. She creates an educational child’s trust for each, to last until the child is 30, naming their father as trustee. Oksana realizes that by doing this, she will not obtain the annual gift tax exclusion for any money she gives the trust, because, as I explained, federal tax law requires the child to receive the money outright by age 21 for the exclusion to apply. But Oksana wants adult

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