Gifting to Avoid Estate and Gift Taxes

Going, Going, Gone!
U.S. taxpayers are experiencing a “perfect storm” of opportunity to make tax-free transfers (gifts) of assets such as family businesses, real estate and other wealth from one generation to the next. The gift tax was first enacted in 1932 by the federal government. Over the coming months, we all have what may be the best opportunity since 1932 to gift family assets without a gift tax now and to avoid significant estate taxes later.

Two notable exceptions to the gift tax
Some people are not aware that giving away assets to their children or other individuals may create a taxable event. The “gift tax” referenced above applies to anything of value transferred by one individual to another. There are two notable exceptions to the gift tax. One is an “annual exclusion” which is an exception that allows individuals to gift up to $13,000.00 per year per person without any gift tax consequences.
A second exception is an overall gift tax exemption which historically has been limited to $1M during an individual’s lifetime.

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The Value of Summer Memories at The Family Cottage

It doesn’t matter what time of day you arrive, everything always looks the same. Granted, the trees are taller and wildflowers seem to be growing everywhere. But your family cottage is the same to you today as it’s always been.

Cubby holes filled with trinkets and treasures
While waving hello to neighboring friends you realize every family cottage and summer home is as different as the memories gathered by families every summer. Each cottage has a special cubby hole filled with trinkets and treasures from sandy beaches and hiking adventures through surrounding woods. Weathered hinges guarantee screen doors will squeak open and slam shut right on cue announcing that this is summer. It’s easy to get caught up in the moment of racing down to the lake and assuming every summer will be just like the last.

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Real Estate Taxes and Joint Ownership of Michigan Real Property

The Practical Effect of Michigan Supreme Court’s Decision in the case of Klooster v City of Charlevoix
The Supreme Court’s decision in the Klooster case provides that certain types of joint ownership of real estate in Michigan can prevent property taxes increasing at the time of a joint owner’s death. While the decision is generally favorable to the taxpayer, there are various rules and contingencies that must be satisfied in order to achieve property tax savings.

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Penning to Speak at ICLE 51st Annual Probate and Estate Planning Conference

Dan A. Penning has been invited as a featured speaker to present on the topic of estate and gift tax issues concerning cottage succession planning at the ICLE 51st Annual Probate & Estate Planning Conference for Michigan attorneys. Penning will join two other speakers addressing cottage law succession planning issues during the three-day conference featuring a variety of topics for Michigan attorneys seeking continuing legal education. The conference will be held at the Grand Traverse Resort, in Acme, Michigan on May 19-21, 2011 and a second presentation will be held at The Inn at St. John’s in Plymouth, Michigan on June 17-18, 2011.

Proposed Tax Would Actually Hit Family Businesses Hard

Proposed “Carried Interest” Tax Purports to Soak Wall Street But Hits Family Businesses

Proposed Carried Interest Tax Hits Beyond Wall StreetFor the time being, the Senate has again abandoned efforts to impose a “carried interest tax” on venture capitalists, investors, and managers of family businesses. The tax would have increased the 15% capital gains tax rate on certain investors’ profits to the top income tax rate, which is scheduled to hit 39.6% on January 1st (H.R. 4213). The share of investors’ profits is called “carried interest.” It might appear at first glance that it’s perfectly fine for investment managers to be taxed at higher rates on their “carried interest.” But venture capitalists and investors don’t reside exclusively on Wall Street. The law was written so broadly that it could have hit approximately 6.5 million people invested in real estate partnerships that own anything from a single dwelling to sizable commercial properties.

The proposed legislation attempts to sway middle America by couching the carried interest tax as imposing a higher rate on “investment management services” and “investment managers” who work for Wall Street houses.

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