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.