How can I best accelerate my lifetime gifting to my children to reduce my taxable estate and also to have less money vulnerable to my prospective creditors?
Accelerated lifetime gifting can reduce your estate taxes and also protect
those assets you don’t need to support your lifestyle. Gifting may
also shift your assets to a less liability-prone recipient and even save
you income taxes if you transfer your income-producing assets to recipients
in a lower tax bracket. The present annual gift tax exclusion of $14,000
annually per recipient is tax-free, provided your gift is immediately
available to the recipient. For example, a couple with three children
can gift to their children $84,000 annually, tax-free. To accelerate your
gifts you can transfer property in exchange for an installment sale note
(a SCIN) that would be payable annually. Each year you can forgive $14,000
per recipient without tax consequences. Ultimately, the note self-liquidates.
This asset transfer would be a ‘fair consideration’ exchange
(the note) and therefore not fraudulent against creditors. But to keep
the note safe from creditors, one should title it to a family limited
partnership. It’s best to also gift those assets that are most vulnerable
to creditors and retain exempt or otherwise protected assets.