Tags: gift | tax | wealthy | generosity

Fear of Tax Changes Drives Generosity of the Wealthy

Friday, 14 Dec 2012 07:45 AM

By Michelle Smith

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It is a season for giving and many wealthy Americans see an additional incentive to be extremely generous. A sharp hike of gift and estate taxes is one of the consequences of going over the fiscal cliff.

And as the deadlock in Washington drags on, many people are taking preventive action.

The current rate on gifts and estates is 35 percent. If lawmakers don't strike a deal before year-end and the automatic tax increases kick in, that rate rises to 55 percent.

Editor's Note: Tiny Loophole Found in 70,320 Page IRS Tax Code Could Pay $87,500

Furthermore, bequests of more than $1 million will become taxable, which is a major change when compared with the current lifetime exemption limit of up to $5.12 million per person.

Bloomberg reports that these days are hectic for trust and estate lawyers as they are working around the clock making house calls and flying overseas to meet with clients.

Fees for creating trusts can range from $10,000 to more than $100,000, depending on the complexity of the trust and the time constraints, Bloomberg says.

Still, in many cases the demand is exceeding the capability to serve and potential clients are being turned away. Estate planning can already be a timely affair and some of the solutions required for individuals making these hasty decisions are quite complex.

However, just because someone can transfer money doesn’t mean they should, said Richard Behrendt, director of estate planning for Baird's Private Wealth Management.

“I worry about 65-year-old, recently retired couples on fixed incomes with $3 million or $4 million in assets reading about what a tremendous opportunity it is,” he tells CNNMoney.

However, at the moment, for many rich people, the focus is obviously on avoiding higher taxes.

Jonathan Blattmachr, a principal of Eagle River Advisors in New York, tells CNNMoney that the amount given away in 2012 will be up to four times as much as in any other year.

Editor's Note: Tiny Loophole Found in 70,320 Page IRS Tax Code Could Pay $87,500

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