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In The Winery
amounts could be on top of direct payments to years and not more than nine years, and 1.87%
a provider for medical services or educational for loans more than nine years.
tuition for anyone, related or not, which are not
considered gifts. • Gifts and sales to intentionally defective grant-
or trusts (IDGTs) can be used to transfer cash,
• Make large gifts of assets with potentially securities, business interests, real property and
depressed values and subject to discounts. other investment assets to descendants in a
Leverage the current $11.7 million unified cred- tax-beneficial manner. The sale or gift of assets
it amount with gifts of fractional interests in from the parents or grantors to an IDGT is not
real property or ownership interests in a family subject to income tax, because the grantors are
or closely held business that qualify for valua- treated as having sold the assets to themselves.
tion discounts. To protect against retroactive Only gift tax is due on the transfer. Assets trans-
changes to the $11.7 million gift exemption ferred to the IDGT remain in the trust and grow
amount planners should also consider use of outside the grantor’s estate, allowing them to
disclaimers, formula gifts, and lifetime qualified appreciate tax-free.
terminal interest property (QTIP) trust elections
as part of the planning with trusts. Owner-operators of successful businesses likely
already have some familiarity with the estate tax.
• Make low-interest loans to children. Loans This tax works in conjunction with the federal gift
for homes or business opportunities are often tax, which applies to transfers of property during
very attractive, with August 2021’s Applicable one’s lifetime. In theory, both estate transfers and
Federal Rates (AFRs) at .19% for loans three gifts made during one’s lifetime are currently taxed
years or less, 1.00% for loans more than three at a maximum marginal rate of 40%.
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