This Week's Topic: Gift During Life to Save Taxes

Taxable gifts that you make during your life are much cheaper than taxable gifts at your death.

Assume that you have used all of your federal estate tax exemption of $1,000,000 before your death as a result of making gifts to your loved ones. And assume that you now have the challenge of making a another $1,000,000 gift to loved ones and you are wondering whether to make the gift while living or as of your death. From a tax standpoint, it will be much, much cheaper to make the gift while you are living. The reason is that if one makes a $1,000,000 taxable gift while living, assuming that the donor is in the 50% tax bracket, the IRS will be paid $500,000 in tax from the donor, for a total outlay of $1,500,000.

However, if I want that same $1,000,000 to go tax free at my death, and I am in the same 50% tax bracket, I must have $2,000,000 since the IRS will take